ASEAN Japan Economic Partnership For A Sustainable and Resilient Future Rev.

ASEAN-Japan
Economic Partnership
for a Sustainable
and Resilient Future
Edited by
Keita Oikawa
and Fusanori Iwasaki
i
ASEAN-Japan
for a Sustainable
Economic Research Institute for ASEAN and East Asia (ERIA)

Sentral Senayan II 6th Floor
Jalan Asia Afrika No. 8, Gelora Bung Karno
Senayan, Jakarta Pusat 12710
Indonesia
© Economic Research Institute for ASEAN and East Asia, 2023

Published in August 2023
All rights reserved. No part of this publication may be

reproduced, stored in a retrieval system, or transmitted in
any form by any means electronic or mechanical without
prior written notice to and permission from ERIA.
The findings, interpretations, conclusions, and views
expressed in their respective chapters are entirely those of
the author/s and do not reflect the views and policies of
the Economic Research Institute for ASEAN and East Asia,
its Governing Board, Academic Advisory Council, or the
institutions and governments they represent. Any error in
content or citation in the respective chapters is the sole
responsibility of the author/s.
Material in this publication may be freely quoted or reprinted
with proper acknowledgement.
ISBN: 978-6025-460470
Cover design and layout by Sukutangan
ii
Foreword from ERIA’s President
As we celebrate the momentous 50th year of ASEAN–Japan

friendship and cooperation, we take this opportunity to
reflect on our shared journey and look forward to a future
brimming with immense promise. This book, titled ‘ASEAN–
Japan Economic Partnership for a Sustainable and Resilient
Future,’ marks this significant milestone, tracing our journey
that began with the establishment of the ASEAN–Japan
Synthetic Rubber Forum in 1973.
Japan's robust foreign direct investment in ASEAN, bolstered

by the Plaza Accord in 1985, has fortified our economic
partnership and propelled ASEAN's transformation from a
production hub to a global consumption powerhouse with
a remarkable $3.6 trillion GDP and a burgeoning centre of
innovation. Even amid the global pandemic, our resilience
has shone through, fostering an expansion in the adoption
of digital services.
Emerging digital technologies, such as robotics, artificial

intelligence (including generative AI), and blockchain,
hold the potential to redefine both business and society.
This book emphasises the urgent need for swift and
effective adoption of these technologies, which are pivotal
for achieving inclusive and sustainable regional growth.
Special attention is given to the development of human
resources capable of harnessing these digital technologies,
addressing the digital skills gap that could otherwise hinder
growth and exacerbate income disparities.
Today, ASEAN is experiencing phenomenal economic

growth, driven in part by its vibrant and dynamic young
digital generation. This momentum underscores ASEAN's
tremendous potential for the future. However, challenges
persist, including disparities in physical, human, and social
capital development across countries, urban and rural
areas, and industries.
Conversely, Japan, despite having one of the most aged

demographic profiles globally, remains a beacon of
advanced technologies and possesses significant human
and social capital. These attributes position Japan as an
iii
indispensable partner in harnessing ASEAN's potential. It is
evident that ASEAN and Japan possess unique advantages
and complement each other. Therefore, their economic
cooperation must strive to deepen economic integration
and co-create innovations for mutual benefit.
Aligned with these challenges and potential solutions, this

book presents recommendations across four key themes:
'Promoting Trade and Investment', 'Encouraging a Digital
and Innovative Society', 'Aiming for a Sustainable Future',
and 'Building a Professional Workforce for the Future.' These
recommendations pave the way for fostering a sustainable
and resilient ASEAN–Japan economic partnership.
To bring this vision to life, ERIA is poised to launch the Digital

Innovation and Sustainable Economy Centre, with generous
support from the Japanese government. This centre marks
the first step towards the co-creation of the ASEAN and
Japanese economies.
As we commemorate this golden jubilee of friendship and

cooperation, let this book serve not only as a testament
to our shared history but also a blueprint for our journey
towards a sustainable, resilient, and digitally empowered
future.
Professor Tetsuya Watanabe
iv
TA BLE OF CO N TE N T S
List of Authors vi
List of Figures vii
List of Tables ix
Executive Summary xi
Chapter 1 Review of ASEAN–Japan Economic Relations and Ongoing 1

Initiatives: ASEAN–Japan Comprehensive Economic
Partnership (AJCEP) Study
Doan Thi Thanh Ha and Upalat Korwatanasakul
Chapter 2 Survey on the Doing-Business Environment in ASEAN 23
Keita Oikawa and Fusanori Iwasaki
Chapter 3 ASEAN–Japan Cooperation in the New Emerging Agenda 89
Keita Oikawa ,Venkatachalam Anbumozhi ,Lurong Chen , Christopher L.

Hardesty, Fusanori Iwasaki , Takuma Kato, Michikazu Kojima, Masanori
Kozono, Fumitaka Machida, Melanie S. Milo, Asuka Nagatani, Han Phoumin,
Kei Sudo, Aladdin D. Rillo, and Rashesh Shrestha
Chapter 4 Survey on International Economic Cooperation 143
Chapter 5 The Current ASEAN–Japan Economic Partnership 173
Chapter 6 Recommendations for the ASEAN–Japan Economic Partnership for 211

a Sustainable and Resilient Future
v
L I ST OF AUTHORS
Doan Thi Thanh Ha

Economist, Economic Research Institute for ASEAN and East Asia
(ERIA)
Upalat Korwatanasakul
Associate Professor, School of Social Sciences,
Waseda University
Keita Oikawa
(ERIA)
Fusanori Iwasaki
(ERIA)
Venkatachalam Anbumozhi
(ERIA)
Lurong Chen
(ERIA)
Christopher L. Hardesty
(UCL Global Business School for Health)
Takuma Kato
(ERIA)
Michikazu Kojima
(ERIA and Institute of Developing
Economies–Japan External Trade Organization [IDE-JETRO])
Masanori Kozono
(ERIA)
Fumitaka Machida
(ERIA)
Melanie S. Milo
(Consultant)
Asuka Nagatani
(ERIA)
Han Phoumin
(ERIA)
Kei Sudo
(ERIA)
Aladdin D. Rillo
(ERIA)
Rashesh Shrestha
(ERIA)
vi
LIST OF F IGU RE S
Figure 2.1 Location of Respondents 27

Figure 2.2 Main Business Areas of Respondents 28
Figure 2.3 Size of Respondent Enterprises 29
Figure 2.4 Difficulties in Trading across Borders 30
Figure 2.5 Difficulties in Trading across Borders by Country 31
Figure 2.6 Difficulty in Trading across Borders by Industry 32
Figure 2.7 Difficulties in Trading across Borders by Company Size 33
Figure 2.8 Expectations toward Public Initiatives to Solve Difficulties in Trading across 34
Borders
Figure 2.9 Types of Human Resources Insufficient to Achieve Business Growth 35
Figure 2.10 Shortages of Skills Required for Middle Management 36
Figure 2.11 Shortages of Skills Required for Middle Management by Country 37
Figure 2.12 Difficulties in Hiring and Training New Graduates and Professionals 38
Figure 2.13 Difficulties in Hiring and Training New Graduates and Professionals by Country 39
Figure 2.14 Expectations towards Public Initiatives to Solve Difficulties in Employing 41

Workers
Figure 2.15 Areas of Interest of Corporate Activities 43
Figure 2.16 Difficulties in Creating Innovative Products and Services 44
Figure 2.17 Difficulties in Creating Innovative Products and Services by Country 45
Figure 2.18 Difficulties in Funding 46
Figure 2.19 Difficulties in Funding by Country 47
Figure 2.20 Expected Public Initiatives to Create Innovation 48
Figure 2.21 Challenges in Doing Business within a Country Where a Company Is Located 49
Figure 2.22 Business Operations in Foreign Countries 51
Figure 2.23 Most Significant Difficulties in Doing Business 52
Figure 2.24 Difficulties in Doing Business in the Country Selected Above 53
Figure 2.25 Difficulties in Doing Business in Japan from the Viewpoint of Foreign 54
Companies
Figure 2.26 Difficulties in Doing Business in Myanmar from the Viewpoint of Foreign 55
Companies
Figure 2.27 Difficulties in Doing Business in Viet Nam from the Viewpoint of Foreign 56
Companies
vii
Figure 2.28 Difficulties in Doing Business in Indonesia from the Viewpoint of Foreign 57
Companies
Figure 3.1 Japan’s Outward Foreign Direct Investment in Asia and the Pacific (FDI Stock 91
in US$ billion)
Figure 3.2 ASEAN–Japan Cooperation Projects on Food, Agriculture, and Forestry 99
Figure 3.3 Primary Energy Supply in ASEAN 117

Figure 3.4 Solar Resource Potential across ASEAN 118
Figure 3.5 Wind Resource Potential across ASEAN 119
Figure 3.6 ASEAN Framework on Sustainable Tourism Development in the Post-COVID 19 123
Era
Figure 3.7 Human Capital Index in ASEAN Member States 132
Figure 5.1 Applying Favourable Tariffs through Economic Partnership Agreements or Free 178
Trade Agreements
Figure 5.2 Unexpected Costs Due to the Lack of Customs Operational Standards on 179
Applying Harmonized System Codes
Figure 5.3 Corruption or Lack of Compliance of Customs Officers 180
Figure 5.4 Time-Consuming Manual or Onsite Procedures Due to Unclear or Unofficial 181
Customs Procedures
Figure 5.5 Time-Consuming Manual or Onsite Procedures Due to Limited Scope of 182
Electronic Services
Figure 5.6 Long Lead Time in Trading Due to Unconnected Electronic Services between 183
Countries
Figure 5.7 Sudden Customs Shutdown in Disaster or Pandemic 184
Figure 5.8 Types of Human Resources Insufficient to Achieve Business Growth 200
Figure 5.9 Shortages of Skills Required for Middle Management by Country 201
by Company Size
Figure 5.12 Difficulties in Hiring and Training New Graduates 204
and Professionals
Figure 5.13 Training Provision by Employers 205
viii
LIST OF TABL E S
Table 1.1 5-Year Average Annual Growth Rate of Trade between Japan and ASEAN 3
Member States
Table 1.2 Chapters of the AJCEP and RCEP Agreements 5
Table 1.3 Tariff Concession Rates, AJCEP and RCEP Agreements 6
Table 1.4 Rules of Origin, AJCEP and RCEP Agreements 8
Table 1.5 Customs Procedures and Trade Facilitation, AJCEP and RCEP Agreements 10
Table 1.6 Sanitary and Phytosanitary Standards, Technical Regulations, and Conformity 13
Assessment Procedures, AJCEP and RCEP Agreements
Table 1.7 Main Provisions of Investment Chapters, AJCEP and RCEP Agreements 16
Table 1.8 Provisions on E-Commerce, AJCEP and RCEP 17

Table 1.9 Provisions on Competition 18
Table 1.10 Challenges of the AJCEP 19
Table 2.1 Organisations that Supported Questionnaire Distribution 26
Table 2.2 Difficulties in Hiring and Training New Graduates and Professionals by Country 40
Table 2.3 Difficulties in Doing Business within a Country Where a Company Is Located by 50
Country
Table 2A1.1 Please Provide Your Company’s Location 61
Table 2A1.2 Which City Is Your Company Located in? 62
Table 2A1.3 Which Industry Is Your Company’s Main Business? 64
Table 2A1.4 Which Year was Your Company Established? 66
Table 2A1.5 What Is Your Company’s Ownership Type? 67
Table 2A1.6 How Many Regular Employees Work for Your Company? 68
Table 2A2.1 Do You Have Difficulties or Issues in Trading across Borders? 68
Table 2A2.2 Please Select the Initiatives You Expect Public Institutions to Take to Solve the 69
Difficulties
Table 2A2.3 Please Add Your Comment on the Initiatives You Expect Public Institutions to 70
Take to Solve the Difficulties or Issues
Table 2A3.1 Do the Following Human Resources Lack in Your Company to Achieve 71
Medium- or Long-Term Business Growth?
Table 2A3.2 Do You Have Difficulties or Issues in Hiring or Training New Graduates and 72
Professionals?
Table 2A3.3 Please Select the Initiatives You Expect Public Institutions to Take to Solve the 73
Difficulties
Table 2A3.4 Please Add Your Comment on the Initiatives You Expect Public Institutions to 74
Take to Solve the Difficulties
ix
Table 2A3.5 Please Indicate the Degree of Shortage of the Following Skills Required for 74
Middle Management to Drive Business Transformation or Innovation
Table 2A3.6 Please Add Your Comments on the Reason Why You Think So, and Specify the 75
Specific Skills Required
Table 2A4.1 Are You Interested in Corporate Activities to Create Innovative Products or 79
Services with Digital Technology?
Table 2A4.2 Do You Have Difficulties in Creating Innovative Products or Services? 80
Table 2A4.3 Please Let Us Know Why You Think So 81

Table 2A4.4 Do You Have Difficulties in Creating Innovative Products or Services? 82
Table 2A4.5 Please Let Us Know Why You Think So 82

Table 2A4.6 Please Select the Initiatives You Expect Institutions to Take to Create 83
Innovation
Table 2A4.7 Please Elaborate the Public Initiatives that Would Be Helpful to Have 84
Table 2A5.1 Please Select Any Difficulties or Issues You Experience in Doing Business within 84
the Country in Which Your Company Locates
Table 2A5.2 Please Specify the Difficulties That You Experience in Doing Business within the 85
Country in Which Your Company Is Located
Table 2A5.3 Are You Operating Businesses in Foreign Countries? 86
Table 2A5.4 Please Indicate the Specific Country with the Most Significant Difficulties in 86
Doing Business
Table 2A5.5 Please Indicate Any Difficulties You Experience in Doing Business in the 87
Country Selected Above
Table 2A5.6 Please Specify Any Difficulties That You Experience in Doing Business in the 88
Table 3.1 Strategic Areas of Cooperation, ASEAN Plus Three Cooperation Strategy on 99
Food, Agriculture and Forestry, 2016–2025
Table 3.2 ASEAN Member States and Others, Health Statistics 105
Table 3.3 Breakdown of Indicators and Universal Health Coverage Efforts 106
in ASEAN
Table 3.4 Recommendations for Government Collaboration on Universal Health 109
Coverage
Table 3.5 Recommendations for the Private Sector and Academic Collaboration on 111
Universal Health Coverage
Table 3.6 Working-Age Population (ages 15–65 years), 133
ASEAN Member States
Table 3.7 Japan’s Official Development Assistance to Selected ASEAN Member States, 135
2021
x
Executive Summary
The formal relationship between the Association of

Southeast Asian Nations (ASEAN) and Japan took root in
1973 with the establishment of the ASEAN–Japan Synthetic
Rubber Forum. This bond was fortified in the late 1980s as
Japan considerably increased its foreign direct investment
(FDI) in ASEAN countries. The main impetus for this surge
was the substantial appreciation of the Japanese yen
following the 1985 Plaza Accord. The momentum of FDI
from Japan continued to rise in the 1990s, driven by
Japanese multinational companies’ global production
fragmentation, facilitated by advancements in information
and communication technology.
ASEAN became increasingly positioned as a new production

base for Japanese companies. Since that time, Japanese
companies have been actively expanding into ASEAN
and exporting products from the region to the rest of the
world. This has helped lead to significant progress in the
sophistication of industries in AMS as well as significant
economic growth in the region. Today, ASEAN has a
gross domestic product (GDP) of about $3.62 trillion. It
has transformed into a giant consumption centre from a
production centre and is transitioning into an innovation
centre. Although the pandemic restricted the movement of
people, goods, and various other resources – leading to the
stagnation of economic activity in both ASEAN and Japan
– it also led to the creation of new digital services and
further expansion of their use, as typified by e-commerce
and cashless transactions. Furthermore, ASEAN's digital
innovation is impressive with over 30 unicorns in 2021 and a
rapidly growing number of start-ups led by young leaders.
ASEAN is currently witnessing remarkable economic growth,

which is, in part, powered by its dynamic and tech-savvy
young digital generation. This momentum signals the
tremendous potential for even greater growth in the future.
However, amid this process, there are still challenges
to overcome. Disparities in physical, human, and social
capital development persist across countries, between
urban and rural areas, and amongst different industries.
Addressing these challenges is crucial to ensure inclusive
and sustainable growth throughout the region.
xi
Despite Japan having one of the most aged demographic profiles worldwide, it
boasts advanced technologies and significant human and social capital. These
assets make Japan an essential partner in harnessing ASEAN's potential for
growth. Recognising their unique advantages, it is evident that ASEAN and Japan
complement each other perfectly. Their economic cooperation should focus on
deepening economic integration and fostering collaborative innovations that
bring mutual benefits for both.
In the spirit of cooperative synergy, it is crucial for ASEAN and Japan to

recognise each other as indispensable partners in their respective economic
development trajectories. With this understanding as a foundation, the following
recommendations are proposed for the ASEAN–Japan Economic Partnership,
aimed at fostering a sustainable and resilient future.
Promote Trade and Investment

Deepen ASEAN–Japan Economic Integration
Upgrade the ASEAN–Japan Comprehensive Economic Partnership. To promote

ASEAN–Japan trade and investment, the ASEAN–Japan Comprehensive Economic
Partnership (AJCEP) agreement should be upgraded. Coverage should be expanded
to include provisions of the Regional Comprehensive Economic Partnership (RCEP)
agreement, chapters on trade in services and investment should be upgraded,
and the AJCEP Secretariat should be established for institutional support.
Equip companies with relevant information on economic partnership and free

trade agreement applications. To improve the ease of doing business, ASEAN
and Japan should introduce simple procedures to optimise the use of economic
partnership agreements (EPAs) and free trade agreement (FTAs) amongst
companies. A mechanism for optimising trade costs should be introduced, and a
consultation service for inquiries from firms on EPAs and FTAs should be provided.
Enhancement of private-sector trading platforms for this purpose should be
considered.
Introduce a fast-track trading scheme under certain conditions. To benefit

intraregional economic activities, ASEAN–Japan should consider introducing
a multinational fast-track trading scheme for emergency relief supplies and
specific industries. The fast-track mechanism would encourage rapid research
and development and business development in the region, stimulate specific
industries and technology areas, and improve the doing business environment. A
project highlighting such procedures should be piloted, and early development of
successful cases can be expanded to other areas of interest.
xii
Accelerate efforts to prevent corruption amongst customs officials. To combat
corruption in AMS, ASEAN and Japan should promote initiatives to improve customs
compliance through the development of anti-corruption manuals and training
programmes for customs officials. Additionally, minimising the opportunities for
face-to-face interaction – by expanding the electronic scope of national single
windows (NSWs) – and strengthening connectivity with private-sector trading
platforms can be effective measures to reduce facilitation payments.
Strengthen Supply Chain Resilience
Build a data supply chain ecosystem to strengthen competitiveness of

international production networks. ASEAN and Japan should build a data
supply chain ecosystem to efficiently respond to supply chain shifts, maintain
competitiveness, and comply with global requirements on sustainability and
human rights issues. This can be achieved through discussions on data sharing
amongst supply chain stakeholders. With the aim of establishing a competitive
digital supply chain in ASEAN and Japan, ERIA has taken the initiative by convening
a study group consisting of experts from business associations and academia.
Expand the scope of digitisation of the intraregional trading system. The

digitisation of trade operations through NSWs and the ASEAN Single Window
(ASW), including online processing of bills of lading and certificates of origin,
should be expanded across ASEAN and Japan. System connectivity amongst
the ASEAN Single Window, NSWs, and private-sector trading platforms should be
enhanced. Moreover, the electronic exchange of certificates of origin should occur
on a multilateral basis. It is important to promote this intracountry and multilateral
digitisation using the same protocols as much as possible, and to promote these
efforts with the necessary financial assistance and human resources.
Provide information on alternative sources of parts and materials for supply

chain resilience. To achieve resilient supply chains, it is essential to promote a
network that enables the utilisation of alternative sources for materials and
inventory supply in case of disruptions. The use of advanced technologies, such
as blockchain, can help achieve this goal. TradeWaltz, a private-sector trading
platform from Japan, demonstrates how supply chain management functions
can be backed by blockchain technology, enabling faster and more accurate
tracking of trading items. The linkage between private-sector platforms and NSWs
should thus be promoted, and necessary knowledge on implementing private-
sector trading platforms should be transferred to AMS.
xiii
Encourage a Digital and Innovative Economy
Promote Start-ups
Build an ASEAN–Japan-wide entrepreneurial ecosystem. To achieve sustainable
growth, ASEAN and Japan should collaborate to foster innovative entrepreneurship
and associated activities. Access to markets, networks, leadership, finance, and
diverse human resources are necessary for a thriving entrepreneurial ecosystem.
Collaborative efforts, such as the ERIA Centre for Digital Innovation and Sustainable
Economy, can serve as catalysts for the development of this ASEAN–Japan-wide
entrepreneurial ecosystem.
Encourage Innovative Smart Cities

Promote citizen-driven smart cities. ASEAN and Japan should collaborate to
develop citizen-driven smart cities to promote economic development and
to enhance the quality of life throughout the region. A citizen-driven approach
prioritises the needs and desires of residents, promoting social inclusion and
enhancing social capital. Japan is already making advanced efforts towards this
goal through its Society 5.0 concept. The Asian Inclusive Smart Cities conference
can be a platform to showcase city-planning projects that respect Asian values
and to develop new city evaluation indicators and standardisations to realise
democratic, inclusive, and resident-centred urban development unique to Asia.
Secure Intellectual Property Rights

Introduce a unified scheme to enable intellectual property protection. ASEAN
and Japan should introduce a unified intellectual property protection scheme,
modelled after the European Union (EU) system, to ensure protection for innovative
technologies and products created by companies and research institutes in the
region. The scheme should establish a standard patent filing and examination
system accessible to all applicants in ASEAN and Japan. Developed AMS can take
the lead in establishing the scheme and should provide individual assistance to
less-developed AMS through knowledge transfer and human resources.
Ensure Regulatory Reform

Introduce a regulatory sandbox system. A regulatory sandbox system in ASEAN and
Japan should be introduced to encourage innovation activities. The system would
allow regulatory authorities to authorise the demonstration of new technologies
and to decide whether to implement the tested regulatory reforms. Requirements
should be developed to allow foreign companies to apply for the system, and
support for the creation of sandboxes in AMS by Japan and Singapore is required.
ASEAN should also consider pilot projects in which the content demonstrated in a
specific AMS can lead to regulatory reform throughout ASEAN in the future; thus,
information sharing is important.
xiv
Aim for a Sustainable Future
Support Carbon Neutrality
Prioritise technology development, demonstration, and supply chain
development towards carbon neutrality. To achieve carbon neutrality in ASEAN,
policymakers should prioritise technology development, demonstration, and
supply chain development while considering a mix of fossil fuel-fired power
generation and clean energy options to suit the region. Japan should actively
develop and demonstrate these technologies and provide affordable energy
transition technologies to ASEAN, promoting advanced technologies to contribute
to an environmentally friendly Asia and to gain new business opportunities. ASEAN
and Japan should also work together to develop cost-saving supply chains that
establish the foundation for the region’s energy transition.
Promote financial support for energy-transition technologies. ASEAN and Japan

should establish a common taxonomy that includes phased transition technologies
to ensure the necessary financial support for ASEAN's energy transition goals.
This requires updating and regularly expanding the Asia Transition Finance Study
Group's taxonomy and the transition finance technology list from ERIA.
Improve energy efficiency and connectivity. To achieve ASEAN's energy transition

goals, ASEAN and Japan must focus on improving energy efficiency and enhancing
energy connectivity throughout the region. Capacity building for energy managers
and experts, such as through the ASEAN–Japan Energy Efficiency Partnership, is
essential. Enhancing energy connectivity through the ASEAN Power Grid would
optimise electricity and accelerate renewable power generation; however, it
requires establishing a power trading institution, as recommended by ERIA. The
ASEAN Power Grid would benefit Japan significantly by enabling many Japanese
companies to conduct business activities using green energy, enhancing their
social reliability and brand, and creating more opportunities for Japanese
companies as power producers in ASEAN.
Introduce emissions trading schemes. ASEAN and Japan should establish an

intraregional emissions trading scheme to harmonise their efforts towards
reducing carbon emissions. AMS should first consider introducing emissions
trading schemes within their own countries with knowledge from Japan, which
is already conducting demonstration experiments. Common rules for the future
harmonisation of such schemes should also be established. A fund to support
the carbon trading market in AMS should be established, and dialogue on this
subject should be deepened between ASEAN and Japan. The EU's Carbon Border
Adjustment Mechanism can serve as a reference for further developments.
Promote carbon credit initiatives. Japan should promote its bilateral credit
efforts, which have been operating since November 2022, internationally. These
xv
bilateral credit initiatives should become an international standard to further
promote ASEAN–Japan cooperation. Additionally, Japan should cooperate with
six remaining AMS in this regard in the future.
Foster a Circular Economy
Provide technology and know-how related to resources recovery and reuse. AMS
should adopt EU-type uniform rules for resources recovery and reuse, with support
for specific institutional design and operation in each country. Japan's technology
and knowledge in resources recovery and reuse – refined through years of rules-
making and operational experience – is instrumental in this regard. Effective waste
collection rules and their proper implementation, predicated on the principles
of extended producer responsibility, are imperative. Japan's experience with its
Containers and Packaging Plastics Law can also provide a valuable model. Defining
the roles and responsibilities of the entities involved in the recycling process, as
shown in Japan's laws and regulations, could be effective in AMS.
Develop a more efficient system for distributing recycled products. ASEAN and
Japan should establish industry standards for recycled products. An integrated
market spanning across borders should be established to foster private sector
participation. Established standards from the EU should be referenced, and they
should be applicable to all businesses to create a larger market.
Reform the Food and Agriculture Sector

Prioritise dissemination of innovative technologies and human resources for
resilient food and agriculture systems. ASEAN and Japan should collaborate
on the development and dissemination of innovative technologies to promote
resilient and sustainable agriculture and food systems. Human resources
development for officials and stakeholders is also essential. Existing projects, such
as the Greenhouse Gas Mitigation in Irrigated Rice System in Asia (MIRSA) and
Capacity Building Project for Farmer's Organizations to Support the Development
of Food Value Chains in ASEAN Countries, should be scaled up, with the view that
there is no one-size-fits-all solution.
Facilitate the implementation of the ASEAN Regional Guidelines for Sustainable

Agriculture in ASEAN. ASEAN and Japan should collaborate to implement the ASEAN
Regional Guidelines for Sustainable Agriculture in ASEAN, with Japan's Green Asia
initiative and ERIA's research project providing support. The active involvement of
AMS is essential, and reporting project outcomes to relevant ASEAN bodies would
pave the way for realising the aims of the guidelines.
xvi
Expand the scope of the ASEAN Plus Three Emergency Rice Reserve. ASEAN and
Japan should work together to expand the ASEAN Plus Three Emergency Rice
Reserve (APTERR) to ensure regional food security during short-term crises, such
as the COVID-19 pandemic. The APTERR's recent successful release of rice from
Japan and the Republic of Korea to mitigate emergency situations in several AMS
highlights its potential.
Establish a new framework for food and agriculture cooperation. A new framework
for the ASEAN Plus Japan Ministers on Agriculture and Forestry (AMAF+Japan)
should be developed to enhance food and agriculture cooperation, as ASEAN-
Japan cooperation approaches its 50th anniversary in 2023.
Increase Inclusive Health Care
Evolve universal health coverage schemes. ASEAN and Japan should work
together to update their universal health coverage (UHC) schemes to match
current demographic and epidemiological needs. Japan's successful composite
approach to UHC should be considered, with priority given to administrative
efficiency and expanding coverage to the informal sector and primary care.
Collaboration between the public and private sectors, as well as research and
development on antimicrobials and medical supply chains, is also recommended.
Circulating technology, human resources, and experience are crucial for overall
regional growth.
Develop the health care workforce and deploy technology. The numbers of the
health care workforce should be boosted throughout the region, and a technology
strategy should be embraced to address regional disparities and to improve
patient outcomes. The UHC model should be leapfrogged through technology by
providing base enablers, such as internet access and mobile wallets. Digitalisation
efforts in various areas should also continue, including cloud; electronic medical
records; and low-bandwidth health care apps for telehealth, decentralised
patient education, and social media. Data should be collected to provide
insights required to construct policies and to monitor implementation outcomes
effectively. Creating consolidated health care databases, implementing digital
transformation best practices, and integrating diverse health care information
are necessary in providing better health care outcomes.
Tackle chronic diseases, and step up preventative efforts against infectious

diseases. ASEAN and Japan should collaborate to address lifestyle and
chronic diseases rampant in the region by increasing the number of available
physicians, preparing the primary care community for more specialty training,
and incentivising wearable medical technologies. For more niche domains like
rare diseases and cancers, the volume of screening should be increased, and
cross-border specialist-to-specialist networks should be established. To address
xvii
infectious diseases, access to immunisation programmes should be increased,
and vaccine records should be digitised.
Utilise public–private partnerships to achieve universal health coverage. Public–

private partnerships should be prioritised to leverage innovation and financial
contributions, and the use of underutilised private insurance and social impact
bonds should be explored towards the goal of UHC. It is also essential to establish
national preventative care centres, increase health care literacy, promote
preventative health behaviours, and enable self-care capabilities.
Endorse Sustainable Tourism
Promote and manage tourism as a tool for regional and local development and
revitalisation. Japan should assist ASEAN in achieving sustainable economic
growth by promoting community-based and people-centred tourism. This
involves leveraging natural and cultural resources to promote regional and
local development and revitalisation while also promoting and preserving the
environment and cultural heritage.
Engage local communities. Japan should assist ASEAN in pursuing sustainable

tourism development by sharing its experience of engaging local communities
in the development and use of spaces for tourism and leisure. For example,
collaborative management under the concept of 'forests for people' has been
implemented in Japan, bringing about wider public participation in forest
management.
Prepare for disasters. Japan should assist ASEAN in promoting sustainable tourism
development by sharing its experiences in developing tourism in the aftermath
of disasters. For instance, Japan's use of traditional ecological knowledge-based
tourism helped in the recovery process following the 2011 Tōhoku earthquake
and tsunami. Additionally, Japan's experience in reducing the vulnerability of
international visitors to disasters through the use of digital technologies is relevant
to ASEAN's emphasis on digital technologies as an enabler for sustainable tourism
development.
Measure sustainable tourism. Japan's experience in establishing governance

structures and generating relevant information for sustainable tourism policies
should be leveraged to assist AMS. Japan's approach emphasises environmental
protection as core to sustainable growth in the tourism sector, as evidenced by
cooperation amongst stakeholders. Japan also developed the Japan Sustainable
Tourism Standard for Destinations, which can provide useful insights for AMS in
developing and adapting sustainable tourism criteria to their contexts.
xviii
Address the Digital Divide amongst Micro, Small, and Medium-Sized
Enterprises
Close the gap. To bridge the digital divide amongst micro, small, and medium-sized
enterprises (MSMEs), ASEAN and Japan should collaborate with the private sector,
including Japan's multinational information and communications technology
(ICT) solution providers. Addressing the business knowledge gap is essential for
effectively utilising ICT tools; Japan's evidence-based policymaking initiative for
micro and SME policies should serve as a useful model. Sharing knowledge and
lessons learned would also enhance the business knowledge of MSMEs.
Build a Professional Workforce for the Future
Address the Mismatch between Human Resources Skills and

Industry Needs
Define human resources skill standards. ASEAN and Japan should define skills
required for the future for human resources development programmes. Japan's
Digital Skills Standard, which integrates business and digital skills, should be
adopted throughout the region. Existing skills standards from the International
Labour Organisation and EU should also be used as references. The framework for
human resources targets should be applied to the diversity of digital application
capabilities in AMS and continually updated to respond to industry demands.
Reskilling and upskilling are essential to remain competitive.
Incorporate common skills into educational programmes. To ensure consistency

between education and employment, ASEAN and Japan should integrate relevant
skill sets into their educational programmes that are applicable to a wide range
of businesses. This can be achieved by involving various educational institutions
and linking to Japan's KOSEN programme. Lifelong learning programmes should
also be developed and linked to the human resources exchange programmes
and involve stakeholders from educational, business, and research institutions.
Foster Inclusive Education
Enhance inclusive education through digital technologies. The ASEAN–Japan

partnership should improve network infrastructure throughout the region
with advanced technologies, such as 5G, and collaborate with public–private
partnerships to provide inclusive education. Educators should commonly use
digital technology to deliver lessons to maximise the benefits of digital education.
xix
Ease the Mobility of Human Resources
Expand mutual recognition arrangements. Mutual recognition arrangements
should be expanded to include more vocational qualifications to increase
the mobility of human resources throughout ASEAN and Japan. The criteria for
recognition should be carefully considered, however, to maintain the level of
service and competitiveness of Japanese occupational qualifications.
Mutually recognise academic credits and degrees. Educational qualifications

and professional standards should be standardised throughout the region
under mutual recognition arrangements, the range of applicable personnel with
specialised skills should be expanded, and the ASEAN–Japan credit transfer system
should be enlarged. Additionally, mutual recognition of credits and standard study
plans for training programmes should be implemented, building upon the existing
ASEAN Credit Transfer System, and linked to the qualifications approved by the
mutual recognition arrangements.
Acknowledgements
We extend our deepest gratitude to Dato Lim Jock Hoi, former Secretary-General
of the Association of Southeast Asian Nations (ASEAN), and Mr Koichi Hagiuda,
former Minister of Economy, Trade and Industry, Japan. In their meeting in January
2022, Dato Lim suggested a new economic partnership between ASEAN and Japan
– the ASEAN–Japan Economic Partnership for a Sustainable and Resilient Future.
This envisioned partnership aims to foster a sustainable, inclusive, and resilient
economic alliance, aligning with the evolving global economic landscape,
especially in the post-COVID-19-pandemic era. Furthermore, the timing is
significant, as ASEAN and Japan celebrate 50 years of ASEAN–Japan Friendship
and Cooperation in 2023. The insightful discussion between Dato Lim and Mr
Hagiuda has greatly influenced our work, providing meaningful direction to this
endeavour.
We express our particular appreciation to Dr Kao Kim Hourn, the Secretary-

General of ASEAN, and the ASEAN Secretariat, for entrusting us with the critical task
of conducting this pivotal study. Their request to assess trade and investment
between ASEAN and Japan and to identify the required activities, outcomes,
and resources for realising this partnership has given us a precious opportunity
to contribute to this important milestone in ASEAN–Japan relations. We also
appreciate the valuable comments received from ASEAN Member States.
Notwithstanding the extensive support and guidance, any errors or oversights

found in this report are solely the responsibility of the authors.
xx
CHAPTER 1
Review of ASEAN–Japan Economic

Relations and Ongoing Initiatives:
ASEAN–Japan Comprehensive Economic
Partnership (AJCEP) Study
Doan Thi Thanh Ha

Economist, Economic Research Institute for ASEAN
and East Asia (ERIA)
Upalat Korwatanasakul
Associate Professor, School of Social Sciences,
Waseda University
1.1 Introduction
1.1.1 Development of the ASEAN–Japan Comprehensive Economic Partnership

(AJCEP)
In November, 2007, Japan and Association of Southeast Asian Nations (ASEAN)

Member States (AMS) concluded a comprehensive economic partnership
agreement in Manila; it was signed by all parties by 14 April 2008. The agreement
– the ASEAN–Japan Comprehensive Economic Partnership (AJCEP) – entered
into force between 1 December 2008 and 1 July 2010, depending on the party. The
AJCEP aims to (i) strengthen ASEAN–Japan economic integration; (ii) enhance
their mutual competitiveness in the world market; (iii) progressively liberalise and
facilitate trade in goods and services in a transparent and liberal investment regime;
(iv) explore new areas and develop appropriate measures for further cooperation
and integration; and (v) facilitate the more effective economic integration of
Cambodia, the Lao People’s Democratic Republic (Lao PDR), Myanmar, and Viet
Nam, and bridge the development gap in ASEAN (ASEAN Secretariat, 2008).
In 2019, the parties signed the First Protocol, amending the agreement. The protocol
aims to strengthen the reciprocal economic ties between Japan and AMS in wide-
ranging fields by completing chapters on trade in services, movement of natural
persons, and investment (ASEAN Secretariat, 2019). The protocol entered into force
on 1 August 2020 amongst Japan, Lao PDR, Myanmar, Singapore, Thailand, and
Viet Nam, and on 1 October 2020 for Brunei Darussalam.
1
1.1.2 Development of the Regional Comprehensive Economic Partnership (RCEP)
AMS leaders and six ASEAN free trade agreement (FTA) partners – Australia,
China, India, Japan, Korea, and New Zealand – launched Regional Comprehensive
Economic Partnership (RCEP) negotiations during the 21st ASEAN Summit and
Related Summits in Phnom Penh in November 2012. The objective of the RCEP
is to achieve a modern, comprehensive, high-quality, and mutually beneficial
economic partnership agreement.1 The RCEP entered into force on 1 January 2022.
1.1.3 Trade and Investment Trends between ASEAN and Japan
Total merchandise trade between ASEAN and Japan reached $240 billion in
2021, accounting for 7% of ASEAN’s total trade in goods, while total foreign direct
investment (FDI) inflows from Japan to ASEAN amounted to $12 billion in the same
year, accounting for 6.7% of total FDI inflows to ASEAN.2 Japan is ASEAN’s fifth-
largest trading partner and external source of FDI in 2021, after the United States
(US), European Union (EU), and China.
The overall statistics, except for those on Cambodia and Myanmar, do not show a
sharp contrast in Japan–ASEAN trade growth before and after AJCEP enforcement
(Table 1.1). First, despite the relatively high average annual growth rates of trade
between Japan and the Lao PDR and Viet Nam after AJCEP enforcement (24%
and 17%, respectively), these trade growth rates after enforcement are lower than
those before by 25%–50%. Second, Brunei Darussalam and Singapore show a drop
in the growth rates of trade between them and Japan after AJCEP enforcement.
The higher trade growth after enforcement can be explained by other economic,
financial, and political shocks. For instance, in 2011, Cambodia enjoyed a boom in
the garment sector and, in turn, increased its export volume (Un, 2011). Myanmar
opened up that same year, welcoming FDI in 2012 through a new investment law.
Therefore, only considering descriptive statistics is insufficient to conclude that
the AJCEP encourages more trade volume or growth between Japan and AMS.
1
ASEAN Secretariat, RCEP, https://rcepsec.org/
2
ASEANStatsDataPortal, Indicators, https://data.aseanstats.org/ (accessed 1 December 2022).
2
Table 1.1: 5-Year Average Annual Growth Rate of Trade between
Japan and ASEAN Member States
(%)
Before After
State Year of AJCEP Enforcement Enforcement of Enforcement of
AJCEP AJCEP
Brunei Darussalam 2009 16 3
Cambodia 2010 8 28
Indonesia 2018 (3) 2
Lao PDR 2008 49 24
Malaysia 2009 2 3
Philippines 2009 (5) 4
Singapore 2008 12 5
Thailand 2009 4 6
Viet Nam 2008 23 17
() = negative, AJCEP = ASEAN–Japan Comprehensive Economic Partnership, ASEAN = Association of Southeast

Asian Nations, Lao PDR = Lao People’s Democratic Republic.
Source: Authors, based on ASEANStatsDataPortal, Indicators, https://data.aseanstats.org/ (accessed 1 December
2022).
3
1.2 Comparison of the AJCEP and RCEP Agreements
1.2.1 Overview
Table 1.2 summarises the differences between the AJCEP and RCEP agreements.
Generally, the AJCEP is generally less comprehensive than the RCEP, as it
lacks systematic discussions on trade remedies, e-commerce, government
procurement, general provisions and exceptions, and institutional provisions.
Moreover, the AJCEP specifies lighter commitments (e.g. limited to joint research,
cooperation, exchange of information, or other forms of non-binding assistance) in
several chapters, including customs procedures and trade facilitation (Chapter 2,
Article 22), trade in services (Chapter 6), temporary movement of natural persons
(Chapter 6), investment (Chapter 7), intellectual property, competition, and small
and medium-sized enterprises (Chapter 8, Article 53). The First Protocol of the
AJCEP did add provisions concerning trade in services, temporary movement of
natural persons, and investment, potentially strengthening reciprocal economic
ties between Japan and ASEAN countries.
4
Table 1.2: Chapters of the AJCEP and RCEP Agreements
Agreement
Chapter
Category Topic AJCEP RCEP
Initial Provisions Initial Provisions and Chapter 1 Chapter 1

General Definitions
Trade in Goods Trade in Goods Chapter 2 Chapter 2
Rules of Origin Chapter 3 Chapter 3
Customs Procedures Chapter 2 Article 22* Chapter 4

and Trade Facilitation
Sanitary and Phytosanitary Chapter 4 Chapter 5

Measures
Trade Remedies - Chapter 7
Trade in Services Trade in Services Chapter 6§* Chapter 8
Movement of Persons Temporary Movement Chapter 6§* Chapter 9

of Natural Persons
Investment Investment Chapter 7§* Chapter 10
Business Environment Intellectual Property Chapter 8 Article 53* Chapter 11
Electronic Commerce - Chapter 12
Competition Chapter 8 Article 53* Chapter 13
Small and Medium Enterprises Chapter 8 Article 53* Chapter 14
Economic and Chapter 8 Chapter 15

Technical Cooperation
Government Procurement - Chapter 15
General Provisions General Provisions and Exceptions - Chapter 11

and Dispute
Settlement Institutional Provisions - Chapter 18
Dispute Settlement Chapter 9 Chapter 19
Final Provisions Chapter 10 Chapter 20
AJCEP = ASEAN–Japan Comprehensive Economic Partnership, RCEP = Regional Comprehensive Economic Partnership.
§
In 2019, the parties signed the first protocol to amend the agreement, which adds provisions concerning trade in services,
movement of businesspeople, and investments.
*Liberalisation with light commitments (e.g. limited to joint research, cooperation, exchange of information, or other forms
of non-binding assistance).
Source: Authors.
5
1.2.2 Trade in Goods
1.2.2.1 Tariff Concession Rates
Although the RCEP aims to liberalise its positive list by eliminating 86%–100% of
tariffs within 20 years, the tariff concession rates of the RCEP (91% on average)
are lower than those of the AJCEP (93% on average) (Table 1.3). With higher tariff
concession rates, the AJCEP offers greater incentives to Japanese manufacturers
to fragment their regional production value chains in the ASEAN region, as the cost
efficiencies will allow Japanese products manufactured in ASEAN to compete in
international markets, particularly India and the EU. Thus, the AJCEP could enhance
ASEAN’s role as an exporter of Japanese technology-intensive products to the rest
of the world.
Table 1.3: Tariff Concession Rates, AJCEP and RCEP Agreements

(%)
AJCEP RCEP
Brunei Darussalam 98 98
Cambodia 85 87
Indonesia 91 91
Lao PDR 86 86
Malaysia 94 90
Myanmar 85 86
Philippines 97 91
Singapore 100 100
Thailand 96 90
Viet Nam 94 89
Average ASEAN 93 91
Japan 92 88
AJCEP = ASEAN–Japan Comprehensive Economic Partnership, ASEAN = Association of Southeast Asian Nations, Lao
PDR = Lao People’s Democratic Republic, RCEP = Regional Comprehensive Economic Partnership.
Source: Authors, based on Park (2022).
6
1.2.2.2 Rules of Origin
The consistent application of the rules of origin (ROO) for all products under
the RCEP simplifies the origin verification process and, in turn, raises the RCEP’s
utilisation rate. In addition to the indirect or build-down formula under the
AJCEP, the RCEP includes the direct or build-up formula for regional value chain
calculations, allowing a more comprehensive range of products to be applicable
under the RCEP.3 Moreover, the RCEP ROO contain more minimal operations and
process categories than those under the AJCEP. Lastly, adopting the diagonal
cumulation scheme4 potentially generates positive gains due to the deepened
regional value chains amongst RCEP parties – considered consolidated and
upgraded ASEAN+1 FTAs – including the AJCEP. Table 1.4 summarises the detailed
differences regarding the ROO of the AJCEP and RCEP agreements.
3
Direct/build-up formula:
RVC = (VOM + Direct Labour Cost + Indirect Overhead Cost + Profit + Other Costs)/FOB) x 100
Indirect/build-down formula:
RVC = (FOB – VNM/FOB) x 100
where FOB = value of the good, inclusive of the cost of transport to the port or site of final shipment abroad; RVC = regional
value content; VNM = value of non-originating materials used in the production of the good; VOM = value of originating
materials, parts, or produce acquired/self-produced and used in the production of the good.
4
There are three types of cumulation: (i) bilateral cumulation, where only raw materials or components in the preference-
granting country can be counted; (ii) diagonal cumulation, where raw materials or components from the preference-
granting country and a list of other designated countries to which the same ROO apply can be counted; and (iii) full
cumulation, where raw materials from all countries to which the same ROO apply can be counted (World Customs
Organization, n.d.)
7
Table 1.4: Rules of Origin, AJCEP and RCEP Agreements
Rule of Origin AJCEP RCEP
De minimis 10%; 10%

for some agricultural
products, 7%
Regional 40% 40%

value (Indirect/build-down) (Indirect/build-down
contents or direct/build-up)
Minimal operations and Chapter 3, Article 30 Chapter 3, Article 3.6

processes (non-qualifying 7 operations and 11 operations and
operations) processes processes
Certificate of origin Public Public
Detailed components - -
Declaration of origin by approved No Yes

exporters and declaration of origin by
all exporters or producers
Provisions to develop an electronic No Yes

system for origin information
exchange
Full list of the product-specific rule, No Yes

which covers all tariff lines at the HS
6-digit level
8
Rule of Origin AJCEP RCEP
Allowance of the application of No Yes

chemical reaction rules for specific
tariff lines in an equal manner to
other rules
Treatment of an indirect material No Yes

as an originating material without
regard to where it is produced
Provision where a non-originating material No Yes

undergoes further production that confers
originating status, that material will be
treated as originating when determining
the originating status of the subsequently
produced good
Allowance of a post-importation No Yes

claim for preferential tariff treatment,
subject to the RCEP participating
countries’ domestic laws and
regulations
AJCEP = ASEAN–Japan Comprehensive Economic Partnership, HS = Harmonized System, RCEP = Regional

Comprehensive Economic Partnership.
Notes: Minimal operations and processes (non-qualifying operations) are as follows:
AJCEP: (a) operations to ensure the preservation of products in good condition during transport and storage
(e.g. drying, freezing, keeping in brine) and other similar operations; (b) changes of packaging and breaking up
and assembly of packages; (c) disassembly; (d) placing in bottles, cases, boxes, and other simple packaging
operations; (e) collection of parts and components classified as a good pursuant to Rule 2(a) of the General Rules
for the Interpretation of the Harmonized System; (f) mere making-up of sets of articles; or (g) any combination of
operations referred to in subparagraphs (a) through (f).
RCEP: (a) preserving operations to ensure that the goods remain in good condition for the purposes of transport
or storage; (b) packaging or presenting goods for transport or sale; (c) simple processes consisting of sifting,
screening, sorting, classifying, sharpening, cutting, slitting, grinding, bending, coiling, or uncoiling; (d) affixing or
printing of marks, labels, logos, or other like distinguishing signs on goods or their packaging; (e) mere dilution
with water or another substance that does not materially alter the characteristics of the good; (f) disassembly of
products into parts; (g) slaughtering of animals; (h) simple painting and polishing operations; (i) simple peeling,
stoning, or shelling; (j) simple mixing of goods, whether or not of different kinds; or (k) any combination of two or
more operations referred to in subparagraphs (a) through (j).
Source: Authors, based on ASEAN Secretariat (2022), Park (2022), and ASEAN Secretariat, RCEP, https://rcepsec.org/.
9
1.2.2.3 Customs Procedures and Trade Facilitation
The RCEP provides more detailed information on customs procedures and

trade facilitation than the AJCEP. Specifically, the AJCEP lacks discussion on
the application of information technology (Chapter 4, Article 4.12), authorised
operators (Chapter 4, Article 4.13), express consignments (Chapter 4, Article
4.15), and customs cooperation (Chapter 4, Article 4.19), implying slower customs
procedures in the AJCEP (Table 1.5).
Table 1.5:
Customs Procedures and Trade Facilitation, AJCEP and RCEP Agreements
AJCEP RCEP
Customs Procedures
Consistency Chapter 2, Article 22 Chapter 4, Article 4.4
Transparency Chapter 2, Article 22 Chapter 4, Article 4.5
Enquiry Points No Chapter 4, Article 4.6
Customs Procedures No Chapter 4, Article 4.7
Pre-Shipment Inspection No Chapter 4, Article 4.8
Pre-Arrival Processing No Chapter 4, Article 4.9
Advance Rulings No Chapter 4, Article 4.10
Release of Goods No Chapter 4, Article 4.11
Application of Information Technology No Chapter 4, Article 4.12
Risk Management No Chapter 4, Article 4.14
Express Consignments No Chapter 4, Article 4.15
Post-Clearance Audit No Chapter 4, Article 4.16
10
AJCEP RCEP
Time-Release Studies No Chapter 4, Article 4.17
Review and Appeal No Chapter 4, Article 4.18
Consultations and Contact Points No Chapter 4, Article 4.20
Implementation Arrangement No Chapter 4, Article 4.21
AJCEP RCEP
Trade Facilitation
Chapter 2, Article 22 Chapter 4, Article 4.13

(a) simplify its Measures for authorised operators:
customs procedures (a) low documentary and data
requirements, as appropriate;
(b) low rate of physical inspections and
examinations, as appropriate;
(c) rapid release time, as appropriate;
(d) deferred payment of duties, taxes,
fees, and charges;
(e) use of comprehensive guarantees or
reduced guarantees;
(f) a single customs declaration for all
imports or exports in a given period; and
(g) clearance of goods at the premises
of the authorised operator or another
place authorised by a customs authority.
Chapter 2, Article 22 Chapter 4, Article 4.13

(b) harmonise its (a) exchanging information on such
customs procedures, schemes and on initiatives to introduce
to the extent possible, new schemes;
with relevant (b) sharing perspectives on business
international views and experiences, and best
standards and practices in business outreach;
recommended (c) sharing information on approaches to
practices such as mutual recognition of such schemes; and
those made under (d) considering ways to enhance the
the auspices of benefits of such schemes to promote
the Customs Co- trade, and, in the first instance,
operation Council. to designate customs officers as
coordinators for authorised operators to
resolve customs issues.
11
AJCEP RCEP
Trade Facilitation
Chapter 4, Article 4.19

(a) the implementation and operation of
this chapter;
(b) developing and implementing
customs best practice and risk
management techniques;
(c) simplifying and harmonising customs
procedures;
(d) advancing technical skills and the use
of technology;
(e) application of the Customs Valuation
Agreement; and
(f) such other customs issues as the
parties may mutually determine.
AJCEP = ASEAN–Japan Comprehensive Economic Partnership; RCEP = Regional Comprehensive Economic Partnership.
Source: Authors.
1.2.2.4 Sanitary and Phytosanitary Standards, Technical Regulations, and

Conformity Assessment Procedures
Although the RCEP provides more detailed information on sanitary and

phytosanitary standards (SPS) and technical barriers to trade (TBT) than the AJCEP,
the AJCEP formulates sub-committees for SPS and TBT to exchange information;
facilitate cooperation and technical consultations; and provide capacity building,
technical assistance, and exchange of experts (Table 1.6). Therefore, the AJCEP is
likely to benefit policymakers, especially in AMS, resulting in more comprehensive
liberalisation of goods despite the rise of non-tariff measures.
12
Table 1.6: Sanitary and Phytosanitary Standards, Technical Regulations, and
Conformity Assessment Procedures, AJCEP and RCEP Agreements
AJCEP RCEP
Sanitary and Phytosanitary Standards
Sub-Committee on Sanitary and Chapter 4, Article 40 No, but following the

Phytosanitary Standards WTO Committee
on Sanitary and
Phytosanitary
Measures and
reporting directly to
the Committee on
Goods
Enquiry/Contact Points Chapter 4, Article 41 Chapter 5, Article 5.15

More details
Adaptation to Regional Conditions, No Chapter 5, Article 5.6

including Pest- or Disease-Free
Areas and Areas of Low Pest or
Disease Prevalence
Other Operational Details No Chapter 5:

Article 5.8: Audit
Article 5.7: Risk Analysis
Article 5.9: Certification
Article 5.10: Import
Checks
Article 5.11: Emergency
Measures
Article 5.12:
Transparency
Article 5.13:
Cooperation and
Capacity Building
Article 5.14: Technical
Consultation
Article 5.16:
Implementation
Article 5.17: Dispute
Settlement
13
AJCEP RCEP
Standards, Technical Regulations, and

Conformity Assessment Procedures
Sub-Committee on Standards, Chapter 4, Article 48 No, but following the

Technical Regulations, and WTO Committee
Conformity Assessment on Sanitary and
Procedures Phytosanitary
Measures and
reporting directly to
Committee on Goods
Cooperation Chapter 4, Article 46 Chapter 6, Article 6.9
Enquiry/Contact Points Chapter 4, Article 47 Chapter 6, Article 6.12
Other Operational Details No Chapter 6:

Article 6.5: International
Standards, Guides, and
Recommendations
Article 6.6: Standards
Regulations
Article 6.8: Conformity
Assessment
Procedures
Discussions
Article 6.11:
Transparency
Article 6.13:
Implementing
Arrangements
Article 6.14: Dispute
Settlement
AJCEP = ASEAN–Japan Comprehensive Economic Partnership, RCEP = Regional Comprehensive Economic Partnership,
WTO = World Trade Organization.
Source: Authors.
14
1.2.3 Investment
Concerning investment provisions, the scope of prohibitions of performance

requirements5 in the RCEP is more comprehensive than in the AJCEP, potentially
improving the RCEP’s legal stability and predictability (Table 1.7). However, the
AJCEP may provide more benefits to AMS regarding technology-transfer requests
and royalty regulations. Japan and AMS can negotiate to what extent and what
level of technology transfer should occur to incentivise Japanese investors and
to help improve the production capacity of AMS. Technical assistance – one of
AJCEP’s FTA+ commitments – can improve AMS capacities and encourage them
to identify comparative advantages. For instance, Somboon Advance Tech, a
Thai automotive manufacturing company, had Japanese partners and technical
assistants from Japan provide technical support and training to Somboon’s
engineers (Korwatanasakul and Intarakumnerd, 2020). With such research and
development capability, the company became more self-reliant and established
its own technical team to reduce the use of technical assistants.
Yet under the AJCEP, the negotiation of the investment chapter has been
challenging due to (i) new issues, such as most-favoured nation treatment,
the ratchet mechanism, prohibition of performance requirements, and non-
conforming measures; (ii) no multilateral rules governing the protection of FDI; (iii)
the connection to a commercial presence in the trade in services chapter; and (iv)
preferences on investment regulations for national authorities and development.
5
The RCEP includes commitments to prohibit performance requirements (e.g. a specified level or percentage of domestic
content or technology transfer requirements) on investors as conditions for entering, expanding, or operating. It ensures
future relaxation of investment measures covered by the agreement and mitigates backtracking of commitments. It also
includes a built-in work programme on investor–state dispute settlement provisions. (MTI, n.d.)
15
Table 1.7: Main Provisions of Investment Chapters, AJCEP and RCEP Agreements
Provision AJCEP RCEP
National treatment at the Deferment until O

entry stage preparation of
reservation list
Most-favoured nation Renegotiation O1

treatment at entry stage
Specific WTO TRIMs O O1

measures (e.g. local
demand for procurement
performance requirements,
prohibition of
import/export
balance
requirements)
Prohibition of X O2
technology
transfer
requests
Prohibition X O2
of royalty
regulations
Reservation Adoption of Negotiate after O

table the negative entry into force
list method
Ratchet duty Renegotiation O3
AJCEP = ASEAN–Japan Comprehensive Economic Partnership, ASEAN = Association of Southeast Asian Nations, Lao PDR
= Lao People’s Democratic Republic, RCEP = Regional Comprehensive Economic Partnership, WTO TRIMs = World Trade
Organization’s Agreement on Trade-Related Investment Measures.
Notes:
1
Cambodia, the Lao PDR, Myanmar, and Viet Nam are exempted.
2
Cambodia, the Lao PDR, and Myanmar are exempted. Reservations in most of ASEAN.
3
Cambodia, the Lao PDR, Myanmar, Indonesia, and the Philippines remain obligated to maintain the status quo (i.e. standstill
obligation).
Source: Authors, based on JETRO (2022).
16
1.2.4 E-Commerce
The AJCEP has no provisions for e-commerce because e-commerce is a new ﬁeld
(Table 1.8). Since developing countries participate in the RCEP, several reservations
and non-conforming measures remain. Therefore, establishing a framework of
rules for e-commerce is a significant step forward.
Table 1.8: Provisions on E-Commerce, AJCEP and RCEP
AJCEP RCEP
Free cross-border data distribution No Chapter 12,

Article 12.15
Prohibition of data-localisation requests No Chapter 12,

Article 12.14
Tariff-free import duties No Chapter 12,

Article 12.11
Prohibition of source-code No No
disclosure requests
Non-discriminatory treatment of No No
digital products
Prohibition on requests for the No No

disclosure of cryptography-
related technologies
Source: Authors, based on JETRO (2020).
17
1.2.5 Competition
The AJCEP lacks an implementing agreement and inter-agency cooperation

regarding competition (Table 1.9). The implementing agreements specified in
the RCEP include appropriate measures against anti-competitive activities, the
confidentiality of information, and consumer protection, amongst others.
Table 1.9: Provisions on Competition
AJCEP RCEP
Implementing agreement No Chapter 13, Articles 13.3,

13.5, 13.7
Inter-agency cooperation No Chapter 13, Article 13.4
Source: Authors, based on AJC (2021).
1.3 Way Forward
1.3.1 AJCEP Strengths
The AJCEP provides unique mechanisms, such as higher tariff concession rates and
sub-committees for SPS and TBT, that can facilitate trade liberalisation. Under the
AJCEP common framework, Japan can institutionalise and accelerate its technical
and development assistance to ASEAN – the FTA+ commitments. For instance,
under the AJCEP, ASEAN and Japan have commenced several initiatives to improve
AMS capacities and to encourage them to identify comparative advantages (e.g.
technical assistance for and capacity building in ASEAN, trade and investment
promotion and facilitation measures, trade and investment policy dialogue and
business sector dialogues, measures to facilitate the mobility of businesspeople,
and exchange and compilation of customs tariff and bilateral trade statistics).
These efforts can be combined with human and physical resources and the
experience of more developed AMS to assist those less developed, strengthening
solidarity within ASEAN.
18
1.3.2 AJCEP Challenges
Based on the analysis, the RCEP is generally more comprehensive than the AJCEP,
as it covers wider provisions on trade remedies, e-commerce, government
procurement, general provisions and exceptions, institutional provisions, customs
procedures and trade facilitation, trade in services, temporary movement of
natural persons, investment, intellectual property, competition, and small and
medium-sized enterprises. The challenges are summarised in Table 1.10.
Table 1.10: Challenges of the AJCEP
Challenge Detail
Inefficient trade Lack of systematic discussions on trade remedies, e-commerce,

liberalisation government procurement, and general provisions and
exceptions
Light commitments (e.g. limited to joint research, cooperation,

exchange of information or other forms of non-binding
assistance) in several chapters, including customs procedures
and trade facilitation (Chapter 2, Article 22); trade in services
(Chapter 6); temporary movement of natural persons (Chapter
6); investment (Chapter 7), intellectual property, competition,
and small and medium-sized enterprises (Chapter 8, Article 53)
Complicated and incomprehensive rules of origin, leading to low

utilisation rate and weak trade creation effects
Complicated and slow customs procedures without sufficient

trade facilitation.
Slow adoption of new technology (e.g. the application of

information technology for customs procedures and trade
facilitation)
Slow development Outdated information, provisions, and official website

of trade in services
investment and other Lack of provisions on e-commerce, application of information
provisions technology, performance requirements, competition, ratchet
mechanism, and non-conforming measures
Lack of mechanisms for negotiations across chapters (e.g.

investment chapter and trade in services chapter).
Lack of appropriate measures against anti-competitive activities,

the confidentiality of information, and consumer protection
Lack of government Lack of governmental bodies to monitor and to accelerate

institutional provision progress and to solve issues
AJCEP = ASEAN–Japan Comprehensive Economic Partnership.

Source: Authors.
19
1.3.3 Policy Suggestions
Firstly, the AJCEP should be expanded to cover the provisions that have been
covered by the RCEP to maximise the benefits of both the AJCEP and the RCEP.
On one hand, the AJCEP mainly benefits AMS capacities due to the FTA+
commitments and unique mechanisms (e.g. higher tariff concession rates and
sub-committees for SPS and TBT) that facilitate trade liberalisation.
On the other hand, the RCEP provides a more comprehensive discussion on trade
liberalisation and the deepened regional value chains amongst RCEP parties;
therefore, ASEAN and Japan are able to enhance their regional production networks
and, in turn, improve competitiveness as production and exporting hubs of goods
and services, particularly from the manufacturing sector.
ASEAN and Japan can maximise their gains from both the AJCEP and RCEP through
compatibility between the two agreements, which may enhance ASEAN’s role
as an exporter of technology-intensive products to the rest of the world, while
Japanese manufacturers would have a greater incentive to fragment their regional
production value chains instead of locating in bilateral economic partnership
agreement partners.
Secondly, the AJCEP should expedite its development of trade in services,

investment, and other provisions, implying that more discussions between Japan
and AMS are required to raise awareness of the benefits of the AJCEP and to speed
up ongoing trade liberalisation. Furthermore, as the AJCEP lacks information
technology utilisation and discussion on e-commerce, the AJCEP must undergo a
digital transformation at the policy discussion and formation levels as well as the
policy implementation level to utilise digital technology effectively and efficiently
in trade liberalisation and facilitation.
Lastly, given the difficult and complex process of creating a single, continent-wide
market for goods, services, and investment, it is logical that regional institutions be
developed over time to enforce rules and to monitor implementation. One critical
institutional support is the establishment of the AJCEP Secretariat to oversee the
overall implementation of the AJCEP agreement.
20
References
Association of Southeast Asian Nations (ASEAN) Secretariat, RCEP,

https://rcepsec.org/
––––– (2008), Agreement on Comprehensive Economic Partnership Among Japan
and the Member States of the Association of Southeast Asian Nations (AJCEP),
https://asean.org/wp-content/uploads/2021/08/Agreement.pdf
––––– (2019), First Protocol to Amend the Agreement on Comprehensive Economic
Partnership among Member States of the Association of Southeast Asian
Nations and Japan, https://asean.org/wp-content/uploads/2021/08/AJCEP-
Prtcl-CTC.pdf
––––– (2022), In Focus: Rules of Origin (ROO) under the Regional Comprehensive
Economic Partnership (RCEP), Jakarta.
ASEAN–Japan Centre (AJC) (2021), ASEAN–Japan Centre RCEP Webinar Series:
Basic Structure (Chapters 1, 18 and 20) and Competition (Chapter 13), Tokyo.
ASEANStatsDataPortal, Indicators, https://data.aseanstats.org/ (accessed
1 December 2022).
Government of Singapore, Ministry of Trade and Industry (MTI) (n.d.), What You
Need to Know about the RCEP, https://www.mti.gov.sg/-/media/MTI/
Microsites/RCEP/What-You-Need-to-Know-about-the-RCEP.pdf
Japan External Trade Organization (JETRO) (2020), Think About the RCEP: Research
Agendas in Political Science and Economics, Tokyo.
––––– (2022), RCEP Agreement Manual, Tokyo [in Japanese].
Korwatanasakul, U. and P. Intarakumnerd (2020), ‘Automobiles’, Global Value
Chains in ASEAN Papers, No. 12, Tokyo: ASEAN-Japan Centre (AJC).
Park, I. (2022), ‘Comparison of the Regional Comprehensive Economic Partnership
(RCEP) and Other Free Trade Agreements’, in F. Kimura, S. Thangavelu, and
D. Narjoko (eds.), Regional Comprehensive Economic Partnership (RCEP):
Implications, Challenges, and Future Growth of East Asia and ASEAN, Jakarta:
Economic Research Institute for ASEAN and East Asia (ERIA).
Un, K. (2012), ‘Cambodia in 2011: A Thin Veneer of Change’, Asian Survey, 52(1),
pp.202–09.
World Customs Organization (n.d.), Rules of Origin Handbook, https://www.
wcoomd.org/-/media/wco/public/global/pdf/topics/origin/overview/
origin-handbook/rules-of-origin-handbook.pdf?db=web
21
22
CHAPTER 2
Survey on the Doing-Business

Environment in ASEAN

Economic Research Institute for ASEAN and East
Asia (ERIA)
2.1 Introduction
This chapter reports on a survey of the business environment in Association of

Southeast Asian Nations (ASEAN) Member States (AMS) conducted by the Economic
Research Institute of ASEAN and East Asia (ERIA) in collaboration with Deloitte
Consulting. The purpose of this survey was to answer the following questions: (i)
what difficulties do companies based in ASEAN find when doing business, (ii) how
serious are the difficulties, (iii) what they expect governments to do to overcome
these difficulties, and (iv) how they are responding to the digital economy to realise
a sustainable and resilient future. The survey had four categories of questions:
trading across borders, human resources development, the digital economy, and
others on doing business.
Results show that many companies perceived difficulties in trading across borders
due to three significant factors: time-consuming manual or on-site procedures
because of the limited scope of electronic services, time-consuming manual or
on-site procedures due to unclear customs procedures, and corruption or lack of
compliance of customs officers. Further, many companies expected governments
or public institutions to promote improvement in customs authority compliance,
provide online services to compare available economic partnership agreements
(EPAs) or free trade agreements (FTAs), and develop references for customs
officers to determine Harmonized System (HS) codes.
The private sector found challenges in securing human resources to achieve

medium- or long-term business growth goals, such as middle managers to
drive business transformation or innovation and/or to manage existing business
processes. Leadership, strategy development, and business modelling and
planning, in particular, were highlighted in the shortage of skills amongst middle
23
managers. In addition, many companies struggled with hiring and training new
graduates (i.e. potential workers) and professionals (i.e. existing workers) due to a
gap between the skills required by the private sector and educational curriculum
or materials, as well as a lack of opportunities for working professionals to reskill.
To overcome challenges in securing human resources, governments and public
institutions were expected to encourage educational institutions to incorporate
common skills into their curriculum, define the common skills necessary before
beginning to work, and enhance the mobility of human resources across countries.
A wave of digital technologies is stimulating the private sector to deal with social
agendas for a sustainable and resilient future, such as upgrading administrative
processes, smart logistics and supply chain resilience, sustainable energy,
cybersecurity, smart cities, and e-government. However, many companies found
difficulties in collecting the necessary information for the creation of innovative
products and services, such as a lack of information on competitors and a lack of
innovative business ideas or technical seeds. Many companies also experienced
difficulties in obtaining funding, such as internal capital or investment budgets,
and found loans inaccessible due to strict conditions. For the private sector
to be innovative and productive, governments and public institutions were
expected to support their expansion globally or through overseas collaborations
and regulatory support (e.g. creation of a sandbox to deregulate technology to
encourage companies to innovate).
Lastly, results on other matters on doing business suggest that many companies
experienced difficulties in paying taxes (i.e. complicated systems of taxation) and
integrating sustainability agenda into their businesses.
This chapter is organised as follows. Section 2 describes how the survey was
designed. Section 3 reports the results of the survey. Section 4 concludes.
24
2.2 Questionnaire Design
2.2.1 Development of Questionnaire Items
To design the survey, desktop research and expert interviews with public agencies
(e.g. the Japan External Trade Organization [JETRO]) were conducted regarding
challenges that companies face in doing business, initial hypotheses were
formulated, and questionnaire items were consequently developed. These items
were distributed online with the support of relevant stakeholders.
To formulate initial hypotheses, 12 indicators1 were adopted from World Bank (2020),
as they are a comprehensive set of issues faced in the business environment.
Desktop research was then conducted to identify the challenges of the 12
indicators in businesses operating in AMS. The material for the desktop research
was from publicly available sources, including the Asian Development Bank (ADB),
Organisation for Economic Co-operation and Development (OECD), and World
Bank (World Bank, 2020; IMD, 2021; OECD, 2021; IEA, 2022; Lin et al., 2022; UNESCAP,
2022). The desktop research suggested selecting indicators for the survey relevant
to the business operation stage (i.e. after the business starts and before it closes),
for example, ‘trading across borders’ and ‘employing workers’.
Next, expert interviews were conducted to examine the initial hypotheses derived
from the desktop research. They were conducted with business associations and
public agencies (e.g. ASEAN Business Advisory Council [ASEAN-BAC], Federation
of Japanese Chambers of Commerce and Industry in ASEAN, and JETRO),2 which
revealed that ‘trading across borders’ and ‘employing workers’ were the most
important indicators in terms of business challenges compared to other indicators.
In addition, ‘innovation’ was identified as a key indicator.
The questionnaire items were thus designed to relate to the business environment
of the companies. They included four categories of questions: trading across
borders, human resources development, digital economy, and other issues on
doing business.
1
Indicators included ’starting a business’, ‘dealing with construction permits’, ‘getting electricity’, ‘registering property’,
‘protecting minority investors’, ‘getting credits’, ’paying taxes’, ‘trading across borders’, ‘enforcing contracts’, ’employing
workers’, ‘contracting with the government’, and ‘resolving insolvency’.
2
To justify the business issues faced by companies, a series of interviews was conducted with public agencies that have
close contact with companies in their respective regions to obtain information and opinions from the companies. Interviews
with external organisations were conducted online with ASEAN-BAC Brunei Darussalam; JETRO Phnom Penh; JETRO Jakarta;
Japanese Chamber of Commerce and Industry, Lao People’s Democratic Republic; JETRO Vientiane; JETRO Kuala Lumpur;
ASEAN-BAC Singapore; and Japanese Chamber of Commerce, Bangkok.
25
2.2.2 Questionnaire Distribution Method
The survey was conducted online to obtain responses from various companies
with diverse demographics (e.g. size of enterprise and industry) in AMS. The
questionnaire items are listed the appendixes of this chapter. The survey was
conducted from 28 October to 1 December 2022. The survey link was distributed to
member companies in each AMS through the organisations in Table 2.1. In addition,
the project team allowed some companies to answer the survey by leveraging
the local network from Deloitte Consulting in AMS to supplement the number of
responses.
Table 2.1: Organisations that Supported Questionnaire Distribution
Country Name
Indonesia Japan External Trade Organization Indonesia (JETRO Jakarta)

Lao PDR Japanese Chamber of Commerce and Industry, Lao PDR
Myanmar Japan Chamber of Commerce and Industry, Myanmar
Philippines Japanese Chamber of Commerce and Industry of the Philippines
Singapore Japanese Chamber of Commerce and Industry Singapore
Thailand The Japanese Chamber of Commerce, Bangkok
Viet Nam Japanese Chamber of Commerce and Industry in Ho Chi Minh City
Viet Nam Japanese Chamber of Commerce and Industry in Vietnam
Lao PDR = Lao People’s Democratic Republic.

Source: Authors.
26
2.3 Results
2.3.1 Respondent Overview
In total, 174 valid responses were obtained by the deadline from the companies.
2.3.2 Location of Respondents
Figure 2.1 shows that most companies are in Viet Nam (54), followed by Singapore
(36), Thailand (23), Indonesia (20), Myanmar (13), the Philippines (13), Malaysia (7),
Lao People’s Democratic Republic (Lao PDR) (7), and Cambodia (1). No respondents
were from Brunei Darussalam or ‘Others’ countries.
Figure 2.1: Location of Respondents
Brunei Darussalam 0
Cambodia 1
Indonesia 20
Lao PDR
7
Malaysia 7
Myanmar 13
Philippines 13
Singapore 36
Thailand 23
Viet Nam 54
Others 0

Note: Q3-1. Please provide your company’s location.
Source: Authors.
27
2.3.3 Main Business Areas of Respondents
Figure 2.2 shows that 22 sectors were captured by the survey. The top four sectors
were ‘wholesale trade’ (15.5% of respondents), followed by ‘other manufacturing’
(11.5%), ‘electronics’ (8.6%), and ‘automotive’ (8.0%).
Figure 2.2: Main Business Areas of Respondents
Wholesale trade 15.5%

Other manufacturing 11.5%
Electronics 8.6%
Automotive 8.0%
Construction 6.9%
Metal Products 6.9%
Finance and insurance 6.9%
Other services 6.9%
Information 5.7%
Pipeline & support activities 4.0%
Food & beverage 2.9%
Real estate 2.9%
Retailers 1.7%
Postal service 1.7%
Companies and enterprises 1.7%
Educational 1.7%
Utilities 1.1%
Professional services 1.1%
Administrative services 1.1%
Health care 1.1%
Arts and recreation 1.1%
Agriculture 0.6%
Note: Q4. Which industry is your company’s main business?

Source: Authors.
28
2.3.4 Size of Respondent Enterprises
Figure 2.3 shows respondents by company size. The top groups are small enterprises
(i.e. 10–49 employees) and large enterprises (i.e. more than 300 employees), both
representing 28.7%, followed by medium enterprises (i.e. 50–299 employees) with
27.0%, and micro enterprises (i.e. less than 10 employees) with 15.5%.
Figure 2.3: Size of Respondent Enterprises
Micro (less than 10) 15.5%
Small (10 to 49) 28.7%
Medium (50 to 299) 27.0%
large (More than or equal to 300) 28.7%
Note: Q7. How many regular employees work for your company?
Source: Authors.
2.4 Trading across Borders
This section provides insights into and implications of trading across borders based
on survey results (i.e. Q8–Q9). It covers the difficulties in trading across borders
in general by country, by industry, and by company size; and the expectations of
public initiatives to solve difficulties in trading across borders.
2.4.1 Difficulties in Trading across Borders
Figure 2.4 illustrates the perceived difficulties in trading across borders and the
impact on respondents' business profits at three levels, ‘low’, ‘medium’, and ‘high’.
When adding ‘low’, ‘medium’, and ‘high’ responses together, more than 60% of
the respondents indicated difficulties in trading across borders. Notably, the most
significant difficulty was noted as ‘time-consuming or on-site procedures due to
limited scope of electronic services’, with 71.8% of the respondents indicating this
issue.
29
Figure 2.4: Difficulties in Trading across Borders
(n=174) LOW MEDIUM HIGH
Time-consuming manual or on-site procedures

due to limited scope of electronic service (e.g. 30.5% 25.9% 15.5% 71.8%
paperwork on procedures remains)
Time-consuming manual or on-site procedures

due to unclear or unofficial customs procedures 23.0% 25.9% 20.7% 69.5%
Corruption of lack of compliance of customs

officers (e.g. facilitation payment) 28.2% 26.4% 14.4% 69.0%
Unexpected cost due to the lack of customs'

operational standards on applying HS codes 27.0% 24.7% 16.7% 68.4%
Sudden customs shutdown in disaster or pandemic 27.6% 21.3% 16.1% 64.9%
Long lead time in trading due to unconnected

36.2% 21.8% 6.9% 64.9%
electronic services between countries
Applying favourable tariff with complex conditions

28.2% 23.0% 12.1% 63.2%
of various EPAs and FTAs
EPA = economic partnership agreement, FTA = free-trade agreement, HS = Harmonized System.

Notes: Excludes ‘never recognized as difficulties or issues’. (Q8. Do you have difficulties or issues in trading across borders?
If you have those, please select the impact of each on profits of your business as follows: (1) high, (2) medium, (3) low, or
(4) never recognized as difficulties or issues.)
Source: Authors.
30
Figure 2.5 examines by country the same responses as Figure 2.4. Malaysia
presented the most significant difficulties with 95.9% of respondents indicating
issues; Malaysian companies do experience higher costs of trading despite the
country’s high economic development level. However, note that the number
of responses from Malaysia is limited (i.e. 7); the country also had the highest
score for ‘low’ challenges at 61.2%. Indonesia followed with 78.6%, and there was
no significant difference amongst other AMS. Singapore had the least perceived
challenges, with only 44.8% of respondents noting them. Adding together ‘high’
and ‘medium’ responses, Indonesia scored the highest with 55.7% of respondents
indicating issues, and Thailand followed with 47.8%.
Figure 2.5: Difficulties in Trading across Borders by Country
LOW MEDIUM HIGH
Singapore (n=36) 25.0% 13.9% 6.0% 44.8%
Malaysia (n=7) 61.2% 24.5% 10.2% 95.9%
Thailand (n=23) 26.7% 37.9% 9.9% 74.5%
Indonesia (n=20) 22.9% 35.7% 20.0% 78.6%
Philipines (n=13) 33.0% 18.7% 22.0% 73.6%
Viet Nam (n=54 ) 31.0% 24.1% 16.4% 71.4%
CLM (n=21 ) 23.1% 19.0% 21.8% 63.9%
CLM = Cambodia, Lao People’s Democratic Republic, and Myanmar.

Notes: Brunei Darussalam is excluded since no responses were obtained. The countries are in order by gross national
income per capita. (Q8. Do you have difficulties or issues in trading across borders? If you have those, please select the
impact of each on profits of your business as follows: (1) high, (2) medium, (3) low, or (4) never recognized as difficulties
or issues.)
Source: Authors.
31
Figure 2.6: Difficulty in Trading across Borders by Industry
LOW MEDIUM HIGH
Construction (n=12) 38.1% 27.4% 27.4% 92.9%
Automotive (n=14) 33.7% 35.7% 19.4% 88.8%
Wholesale Trade (n=27) 38.6% 23.8% 13.8% 76.2%
Metal products (n=12) 34.5% 28.6% 11.9% 75.0%
Other manufacturing (n=20) 31.4% 27.1% 16.4% 75.0%
Electronics (n=15) 28.6% 21.9% 16.2% 66.7%
Other Services (n=12) 32.1% 17.9% 11.9% 61.9%
Information (n=10) 18.6% 20.0% 8.6% 47.1%
Finance and Insurance (n=12) 13.1% 13.1%
0.0% 0.0%
Notes: The data used only include industries with 10 respondents or more. (Q8. Do you have difficulties or issues in trading
across borders? If you have those, please select the impact of each on profits of your business as follows: (1) high, (2)
medium, (3) low, or (4) never recognized as difficulties or issues.)
Source: Authors.
32
Figure 2.7 examines, by company size, the same responses as Figure 2.4. Large
companies indicated slightly higher challenges in trading across borders, with
75.4% compared to micro, small, and medium-sized companies.
Figure 2.7: Difficulties in Trading across Borders by Company Size
LOW MEDIUM HIGH
large
28.9% 31.7% 14.9% 75.4%
(More than or equal to 300, n=50)
Micro
25.4% 24.9% 16.9% 67.2%
(less than 10, n=27)
Small
32.6% 17.4% 14.6% 64.6%
(10 to 49, n=50)
Medium
26.1% 22.8% 13.1% 62.0%
(50 to 299, n=47)
Note: Q8. Do you have difficulties or issues in trading across borders? If you have those, please select the impact of each on
profits of your business as follows: (1) high, (2) medium, (3) low, or (4) never recognized as difficulties or issues.
Source: Authors.
2.4.2 Expectations of Public Initiatives to Solve Difficulties in Trading across

Borders
Figure 2.8 shows public initiatives that companies expected to resolve difficulties in
trading across borders. The top priority of public initiatives should be to ‘promote
improving customs authority compliance’, with 46.6% of respondents agreeing
with this statement. This was followed by ‘provide online service to compare with
condition of available EPAs or FTAs’ with 40.2%. The third priority should be to
‘develop reference or case study for customs officers to determine HS codes’ with
34.5%.
33
Figure 2.8: Expectations toward Public Initiatives to Solve Difficulties in Trading
across
Promote improving customs

46.6%
authority compliance
Provide online service to compare with

conditions of available EPAs or FTAs 40.2%
Develop reference and/or case study for

customs officers to determine HS Codes 34.5%
Extend coverage of ASEAN Single Window

(electronic customs service network) 32.8%
Develop operation continuity plan under

28.7%
disaster and/or pandemic by goverment
Others 3.4%
ASEAN = Association of Southeast Asian Nations, EPA = economic partnership agreement, FTA = free-trade agreement, HS
= Harmonized System.
Note: Q9-1. Please select the initiatives [that] you expect public institutions to take to solve the difficulties or issues.
Source: Authors.
Several responses were received to the open-ended question regarding expected

public initiatives, such as ‘make [a] clear standard for legal interpretation, as
legal interpretations vary from province to province, which is very difficult [when
obtaining] approvals from [each province]’ (Viet Nam).
34
2.5 Human Resources Development
This section examines the results of the survey regarding human resources
development (i.e. Q10–Q14). It covers (i) types of human resources that respondents
felt were insufficient to achieve business growth, (ii) shortages of skills required for
middle management, (iii) difficulties that respondents found in hiring and training
workers, and (iv) public initiatives regarding human resources development that
respondents expected.
2.5.1 Types of Human Resources Insufficient to Achieve Business Growth
Figure 2.9 examines the perceived insufficiency at three levels of four types of
human resources to achieve medium- or long-term business growth (‘slightly’,
‘partially’, and ‘mostly’). More than 50% of respondents indicated a failure of
human resources to help achieve medium- or long-term business growth. Notably,
middle management – who drives business transformation and/or innovation –
were perceived as having the least capability with 83.3% of respondents indicating
this. Specifically, 66.1% of the respondents indicated ‘partially’ and ‘mostly’ middle
management are unable to drive business transformation or innovation.
Figure 2.9: Types of Human Resources Insufficient to Achieve Business Growth
Slightly Partially Mostly
Middle management who drives

business transformation or innovation
(e.g. new business planning and/or development, 17.2% 33.3% 32.8% 83.3%
transforming existing business,
business process improvement)
Middle management who manages

existing business process 20.1% 41.4% 17.8% 79.3%
(e.g. managing quality, cost and/or delivery)
Non-management white-collar
(e.g. knowledge and/or office workers 29.3% 31.6% 11.5% 72.4%
in charge of daily operations)
Labourers dedicated to manual work

25.9% 19.0% 9.2% 54.0%
(e.g. factory or construction operation)
Notes: Excludes ‘never recognized the lack’. (Q10. Do the following human resources lack in your company to achieve
medium- or long-term business growth? If so, please indicate to what extent your company lacks for each human
resources as follows: (1) mostly, (2) partially, (3) slightly, or (4) never recognized the lack.)
Source: Authors.
35
2.5.2 Shortages of Skills Required for Middle Management
Figure 2.10 indicates the perceived shortage of skills required for middle
management at three levels, ‘slightly’, ‘partially’ and ‘mostly’. Around 90% of
respondents indicated experiencing a shortage of skill sets amongst middle
management for all skills. Notably, 94.3% of respondents mentioned that they had
experienced a shortage of ‘leadership’ skills amongst middle management. The
second-highest shortage was ‘strategy development or business modelling’, with
90.8% of respondents indicating this.
Figure 2.10: Shortages of Skills Required for Middle Management
Leadership (e.g. ability to energize

colleagues or stakeholders, lead the team, 16.1% 46.0% 32.2% 94.3%
connect with others to collaborate)
Strategy development or business

modelling and planning (e.g. judgment in 20.7% 34.5% 35.6% 90.8%
any business activities)
Business ideation
(e.g. creativity, expertise in digitalized 20.7% 44.8% 23.6% 89.1%
business)
Business or operation improvement

(e.g. improving developed business or 25.3% 40.2% 23.0% 88.5%
operation)
Operation or infrastructure development

(e.g. expertise in business activities 34.5% 37.4% 14.4% 86.2%
including back office)
Note: Q13. Please indicate the degree of shortage of the following skills required for middle management to drive business
transformation or innovation: (1) mostly, (2) partially, (3) slightly), or (4) never recognized the lack.
Source: Authors.
36
Further, Figure 2.11 shows that all surveyed companies experienced a shortage of
skill sets amongst middle management. Although Malaysia stood out as a country
that scored 100% on this indicator, as previously mentioned, it should be noted
that the responses from Malaysia were limited.
Figure 2.11: Shortages of Skills Required for Middle Management by Country
Singapore (n=36) 30.6% 33.3% 18.3% 82.2%
Malaysia (n=7) 14.3% 42.9% 42.9%

82.2% 100.0%
Thailand (n=23) 22.6% 40.0% 27.0% 89.6%
Indonesia (n=20) 24.0% 45.0% 24.0% 93.0%
Philipines (n=13) 30.8% 32.3% 30.8% 93.8%
Viet Nam (n=54 ) 20.0% 48.5% 24.4% 93.0%
CLM (n=21 ) 19.0% 33.3% 33.3% 85.7%

Notes: Excludes ‘never recognized the shortage’. Brunei Darussalam is excluded since no responses were obtained. The
countries are in the order of gross national income per capita. (Q13. Please indicate the degree of shortage of the following
skills required for middle management to drive business transformation or innovation: (1) mostly, (2) partially, (3) slightly,
or (4) never recognized the lack.)
Source: Authors.
The questionnaire also asked an open-ended question about the shortage of skills
in middle management. The responses included ‘the skills of logical thinking and
Plan-Do-Check-Act (PDCA) improvement cycle are important because they can
promote revolution [in] other departments’ (Viet Nam); ‘managers often focus
on short-term goals and do not have much experience [in considering] long-
term strategy’ (Viet Nam); and ‘it is very difficult to find talented employees for a
management role that matches the standard salary, [as] the salary expectations
of talented professionals are very high, and they tend to work only in the finance,
consulting, or government sectors’ (Singapore).
37
2.5.3 Difficulties in Hiring and Training Workers
Figure 2.12 indicates the difficulties in hiring and training new graduates and
professionals and their impacts on respondents' business profits at three levels,
‘low’, ‘medium’, and ‘high’. The most significant difficulty indicated was ‘gaps
between required skill sets by [the] company and educational curriculum and
materials’, with 82.2% of respondents selecting this. The second difficulty was ‘lack
of opportunities for working professionals to reskill’, with 80.5% of the respondents
agreeing with the statement.
Figure 2.12: Difficulties in Hiring and Training New Graduates and Professionals
(n=l 74) LOW MEDIUM HIGH
Gaps between required skill sets by your

company and educational curriculum or 28.7% 40.2% 13.2% 82.2%
materials
Lack of opportunities for working

professionals to reskill 33.3% 35.6% 11.5% 80.5%
Lack of work experience for students to

sublimate their knowledge to practical 34.5% 32.8% 8.0% 75.3%
work (e.g. internships)
Lack of experienced engineers to train

27.0% 32.2% 12.1% 71.3%
students into potential skilled workers
Inability to hire skilled foreign workers

due to strict requirement for visas or work 31.6% 25.3% 10.9% 67.8%
permits
Cultural or geographical barriers to access

job information for workers (e.g. gender or 42.5% 19.5% 5.7% 67.8%
religious barriers)
Lack of accessibility of formal education to

obtain necessary knowledge for work (e.g. 25.3% 24.1% 9.8% 59.2%
primary, mid, or higher education)
Notes: Excludes ‘never recognized as difficulties or issues’. (Q11. Do you have difficulties or issues in hiring or training new
graduates and professionals? Please select the impact of each on the profits of your business as follows: (1) mostly, (2)
partially, (3) slightly, or (4) never recognized the lack.)
Source: Authors.
38
Figure 2.13 shows the recognised difficulties in hiring and training new graduates
and professionals. Malaysia experienced the most difficulties, with 93.9% citing
difficulties in hiring and training new graduates and professionals. Singapore
experienced the fewest difficulties with 52.0%. When adding together ‘medium’
and ‘high’ responses, Cambodia, Lao PDR, and Myanmar have the most with 52.4%
of respondents indicating difficulties, and Indonesia followed with 52.1%.
Figure 2.13: Difficulties in Hiring and Training New Graduates and Professionals by
Country
LOW MEDIUM HIGH
Singapore (n=36) 29.4% 15.9% 6.7% 52.0%
Malaysia (n=7) 57.1% 26.5% 10.2% 93.9%
Thailand (n=23) 32.3% 27.3% 11.2% 70.8%
Indonesia (n=20) 20.7% 42.1% 10.0% 72.9%
Philipines (n=13) 27.5% 42.9% 4.4% 74.7%
Viet Nam (n=54 ) 36.8% 34.1% 7.9% 78.8%
CLM (n=21 ) 27.9% 27.9% 24.5% 80.3%

income per capita. (Q11. Do you have difficulties or issues in hiring or training new graduates and professionals? Please
select the impact of each on the profits of your business as follows: (1) high, (2) medium, (3) low, or (4) never recognized
as difficulties or issues.)
Source: Authors.
Table 2.2 offers further insight by looking at only ‘medium’ and ‘high’ responses
from Figure 2.12. By examining the shares of types of difficulties in hiring and training
workers, Singapore indicated the most significant challenge as the ‘inability to hire
skilled foreign workers due to strict requirements for visas or work permits’, with
55.6% of respondents citing this; however, Singapore experienced minor difficulties
39
compared to other countries. Focussing on the most significant difficulty for the
other countries, ‘gaps between required skill sets by [the] company and educational
curriculum or materials’ ranked at the top for Indonesia; the Philippines; Viet
Nam; and Cambodia, Lao PDR, and Myanmar. A ‘lack of opportunities for working
professionals to reskill’ ranked at the top for Malaysia, and ‘lack of experienced
engineers to train students into potential skilled workers’ for Thailand.
Table 2.2: Difficulties in Hiring and Training New Graduates and Professionals by
Country
Difficulty SGP MYS THA IDN PHL VNM CLM
Lack of accessibility
of formal education
8.3% 28.6% 39.1% 50.0% 61.5% 27.8% 57.1%
to obtain necessary
knowledge for work
Lack of experienced
13.9% 42.9% 56.5% 55.0% 61.5% 48.1% 52.4%
engineers to train
students
Gaps between required

skill sets by company 25.0% 42.9% 52.2% 65.0% 69.2% 59.3% 71.4%
and educational
curriculum or materials
Lack of work experience

for students to sublimate 22.2% 28.6% 39.1% 60.0% 38.5% 42.6% 57.1%
their knowledge to
practical work
Lack of opportunities for

working professionals to 22.2% 57.1% 34.8% 60.0% 38.5% 57.4% 66.7%
reskill
Cultural or geographical
barriers to access job 11.1% 14.3% 26.1% 30.0% 38.5% 25.9% 38.1%
information for workers
Inability to hire skilled

foreign workers due to 55.6% 42.9% 21.7% 45.0% 23.1% 33.3% 23.8%
requirements for visas or
work permits
CLM = Cambodia, Lao PDR, and Myanmar (n = 21); IDN = Indonesia (n = 20); MYS = Malaysia (n = 7); PHL = Philippines (n =
13); SGP = Singapore (n = 36); THA = Thailand (n = 23); VNM = Viet Nam (n = 54).
income per capita. (Q11. Do you have difficulties or issues in hiring or training new graduates and professionals? Please
select the impact of each on the profits of your business as follows: (1) high, (2) medium, (3) low, or (4) never recognized
as difficulties or issues.)
Source: Authors.
40
2.5.4 Expected Public Initiatives Regarding Human Resources Development
Figure 2.14 shows expected public initiatives from respondents to solve the
difficulties in employing workers. The most selected option was to ‘encourage
educational institutions to incorporate common skill sets widely required by
companies into their curriculum or material’ (47.1%). The second was to ‘define
common skill sets to acquire before working’ (42.5%). The third was to ‘enhance
human resource mobility between countries’ (37.9%).
Figure 2.14: Expectations towards Public Initiatives to Solve Difficulties in Employing

Workers
(n=l 74)
Encourage educational institutions to incorporate

common skill sets widely required by companies into 47.1%
their curriculum or material
Define common skill sets to acquire before working 42.5%
Enhance the human resource mobility between

37.9 %
countries
Provide equal educational opportunities by utilizing

25.9%
digital devices
Strengthen or enhance higher technical education by

23.6%
leveraging experienced foreign engineers
Facilitate international working experience for

students, or international personnel exchange for 23.6%
professionals
Increase compatibility of qualifications or degrees in
ASEAN or internationally 20.7%
to identify potential foreign workers
Others 1.1%
ASEAN = Association of Southeast Asian Nations.

Note: Q12-1. Please select the initiatives that you expect public institutions to take to solve the difficulties.
Source: Authors.
Other expected public initiative responses included: ‘the labour laws [are] not in
line with actual implementation . . . initiatives [are needed] to address the gap
between the public appearance of the labour law and the actual implementation
by public institutions . . . to comply with the rules and laws’ (Viet Nam) and ‘it
would be beneficial for both employers and employees if there were courses on
the various software programs used by the companies’ (Singapore).
41
2.6 Digital Economy
This section discusses the results of survey questions on the digital economy
(i.e. Q15–Q17). It includes (i) areas of interest to create innovative products and
services with digital technologies, (ii) difficulties in creating innovative products or
services regarding information collection in general and by country, (iii) difficulties
in creating innovative products and services regarding funding in general and by
country, and (iv) expectations of public initiatives in creating innovation.
2.6.1 Areas of Interest
Figure 2.15 shows companies’ areas of interest in creating innovative products

and services with digital technologies. The first category was ‘business process
and product innovation’. The most popular area was ‘upgrading administrative
operations’, which was selected by 67.8% of respondents. This was followed by
‘upgrading sales and marketing’ with 53.4%.
The second category was ‘mobility’; 44.3% of respondents were highly interested in
‘smart logistics’ and ‘supply chain resilience’. For the third category of ‘environment
and energy’, the most selected answer was ‘sustainable energy’, with 61.5%;
‘energy management’ followed with 43.1%. The fourth category was ‘safety and
security’. ‘Cybersecurity’ ranked at the top, with 69.0% of respondents. The option
of ‘disaster management’ was also selected by many respondents – 46.0%.
Regarding the fifth category of ‘living and health’, ‘smart cities, buildings, and
homes’ ranked at the top with 45.4%, and ‘well-being’ followed with 41.4%. Lastly,
for the sixth category of ‘government and education’, ‘e-government’ ranked at
the top with 52.9%.
42
Figure 2.15: Areas of Interest of Corporate Activities
1. Business process 2. Mobility

and product
innovation
Upgrading administrative
operations (e.g. human 67.8% Smart logistics 44.3%
resources, accounting)
Upgrading sales and marketing 53.4% Supply chain resilience 44.3%
Smart finance
(e.g. online payment, cloud 27.6% Commuting 27. 6%
funding or lending)
Upgrading production (e.g.

24.1%
agriculture, fisheries)
3. Environment 4. Safety and

and energy security
Sustainable energy 61.5% Cybersecurity 69.0%
Energy management 43.1% Disaster management 46 .0%
Smart security
Circular economy 35.1% (e.g. security system 35.6 %
for privately owned home, or city )
Sustainable tourism 5.2%
5. Living and 6. Government

health and education
Smart cities, buildings

45.4% E-government 52.9%
and homes
Well-being
(e.g. daily healthcare 41.4% Inclusive education systems 34 .5%
management)
Smart health care (e.g.

telemedicine) 37.4%
E-commerce (e.g. super-app) 28.7%
Note: Q15. Are you interested in corporate activities to create innovative products or services with digital technology? Please
select the social agendas based on your interest.
Source: Authors.
43
2.6.2 Difficulties in Collecting Information
Figure 2.16 indicates the perceived difficulties in collecting necessary information

for the creation of innovative products and services at three levels, ‘low’, ‘medium’,
and ‘high’. More than 80% of the respondents experienced all difficulties listed
in Figure 2.16. Although significant differences amongst difficulties were not
observed, the most prevalent was ‘lack of information on competitors’, with 88.5%
affirming. Specifically, 64.4% of the respondents indicated ‘medium’ or ‘high’ to
‘lack of information on competitors’ as a difficulty in creating innovative products
and services.
Figure 2.16: Difficulties in Creating Innovative Products and Services
LOW MEDIUM HIGH
Lack of information on competitors 24.1% 48.9% 15.5% 88.5%
Lack of innovative business idea or

technical seeds 25.3% 40.8% 21.3% 87.4%
Lack of information on market demands or

customer needs 21.3% 50.0% 15.5% 86.8%
Lack of available partners

(e.g. companies, academic institutions, or 33.3% 32.2% 19.5% 85.1%
government)
Lack of available mentors to seek for

advice 42.0% 27.6% 12.6% 82.2%
Notes: Excludes ‘never recognized as difficulties or issues’. (Q16-1-1. (Collecting necessary information) Do you have
difficulties or issues in creating innovative products or services? Please select the difficulties in the categories below.)
Source: Authors.
Figure 2.17 examines by country the same responses as Figure 2.16. More than 70%
of respondents from all AMS experienced difficulties in collecting information to
create innovative products and services. Notably, although the total number of
responses from Malaysia is limited, all of these respondents answered that they
experienced difficulties. Cambodia, Lao PDR, and Myanmar, and Indonesia followed
with more than 90% affirming this.
44
Figure 2.17: Difficulties in Creating Innovative Products and Services by Country
LOW MEDIUM HIGH
Singapore (n=36) 33.3% 32.2% 14.4% 80.0%
Malaysia (n=7) 40.0% 48.6% 11.4% 100.0%
Thailand (n=23) 31.3% 32.2% 20.0% 83.5%
Indonesia (n=20) 25.0% 53.0% 15.0% 93.0%
Philipines (n=13) 20.0% 46.2% 7.7% 73.8%
Viet Nam (n=54 ) 29.3% 41.9% 15.6% 86.7%
CLM (n=21 ) 25.7% 37.1% 30.5% 93.9%

Notes: Excludes ‘never recognized as difficulties or issues’. Brunei Darussalam is excluded since no responses were obtained.
The countries are in order by gross national income per capita. (Q16-1-1. (Collecting necessary information) Do you have
difficulties in creating innovative products or services? Please select the difficulties or in the categories below.)
Source: Authors.
Several respondents commented on difficulties in collecting information to create

innovative products and services, such as ‘market information is not organized
to cover everything’ (Philippines), ‘the details of the information are difficult to
find’ (Viet Nam), ‘it is difficult to collect information because of the lack of sales
and marketing staffs’ (Myanmar), and ‘there is no place [in] education regarding
advanced technology’ (Myanmar).
2.6.3 Difficulties in Funding
Figure 2.18 indicates the difficulties related to funding for the creation of innovative
products and services at three levels, ‘low’, ‘medium’, and ‘high’. Notably, ‘shortage
of internal capital or investment budget’ ranked at the top with 60.3% affirming, and
30.4% of respondents indicated ‘medium’ or ‘high’ regarding the same difficulty in
creating innovative products and services.
45
Figure 2.18:Difficulties in Funding
LOW MEDIUM HIGH

(n=l 74)
Shortage of internal capital or

investment budget 29.9% 17.8% 12.6% 60.3%
Inaccessible loans due to strict

bank loan conditions 33.3% 15.5% 7.5% 56.3%
Lack of information or advice on

fund raising 33.3% 16.7% 3.4% 53.4%
Few or limited access 31.6% 10.3% 4.0% 46.0%

to investors or VC
Few or limited access to cloud

funding or lending 28.7% 12.1% 4.6% 45.4%
VC = venture capital.
Notes: Excludes ‘never recognized as difficulties or issues’. (Q16-2-1. (Funding) Do you have difficulties in creating innovative
products or services? Please select difficulties in the categories below.)
Source: Authors.
Figure 2.19 examines by country the same responses as Figure 2.18. Indonesia
had the most significant difficulties, with 62.0% indicating issues. Cambodia, Lao
PDR, and Myanmar followed with 61.9%. Singapore experienced minor difficulties
in funding with just 39.4% agreeing. When highlighting only ‘medium’ and ‘high’,
Indonesia showed the highest perceived funding issues with 34.0% of respondents
confirming difficulties, and Cambodia, Lao PDR, and Myanmar followed with 32.3%.
46
Figure 2.19: Difficulties in Funding by Country
LOW MEDIUM HIGH
3.9%
Singapore (n=36) 34.4% 1.1% 39.4%
Malaysia (n=7) 37.1% 2.9% 5.7% 45.7%
Thailand (n=23) 34.8% 13.0% 0.9% 48.7%
Indonesia (n=20) 28.0% 24.0% 10.0% 62.0%
Philipines (n=13) 18.5% 20.0% 3.1% 41.5%
Viet Nam (n=54 ) 32.2% 18.5% 7.8% 58.5%
CLM (n=21 ) 29.5% 15.2% 17.1% 61.9%

income per capita. (Q16-2-1. (Funding) Do you have difficulties in creating innovative products or services? Please select
the difficulties in the categories below.)
Source: Authors.
Many respondents commented on perceived difficulties in funding to create

innovative products or services, such as ‘most foreign companies do not invest in
Myanmar now’ (Myanmar) and ‘there are restrictions on international remittances’
(Myanmar).
2.6.4 Expected Public Initiatives to Create Innovation
Figure 2.20 shows public initiatives that companies expected to support innovation.
The most selected answer was ‘support [for] business expansion globally or [in]
collaboration with overseas’, with 41.4% of respondents choosing that option. The
second was ‘regulatory support’ (38.5%), and the third was ‘financial support’
(32.2%).
47
Figure 2.20: Expected Public Initiatives to Create Innovation
Support on business expansion globally or

collaboration with overseas 41.4%
Regulatory support 38.5%
Financial support 32.2%
Provide guidelines in innovation activities 31.0%
Support for intellectual property rights 23.6%
Acceleration or incubation programs 19.5%
Commendation 7.5%
Others 1.1%
Notes: The percentage to the right of each bar is calculated by dividing the total number of responses of the corresponding
row expectation by the total respondents of the questionnaire. (Q17-1. Please select the initiatives that you expect institutions
to take to create innovation.)
Source: Authors.
The questionnaire also captured respondents’ comments on public initiatives that

would be helpful for creating innovation, such as ‘I would welcome deregulation,
such as licensing for foreign companies, as strict regulations ... make it difficult
to start a new business’ (Indonesia) and ‘they would like to see a relaxation of
customs regulations for starting new logistics businesses and a relaxation of
restrictions on foreign investment’ (Myanmar).
48
2.7 Others on Doing Business
This section shares an overview and key takeaways on other matters related to
doing business elicited from the survey results (i.e. Q18–Q19). The data analysis
is composed of (i) challenges in doing business within the country where the
company is located; (ii) business operation in foreign countries; and (iii) the
country with the most significant difficulties in doing business, detailing countries
with the most difficulties (i.e. Japan, Myanmar, Viet Nam, and Indonesia)
2.7.1 Challenges in Doing Business within a Country
Figure 2.21 indicates the perceived challenges in doing business within the country
where a company is located. Amongst the top four difficulties, ‘paying taxes’ ranked
at the top with 48.9% of respondents indicating this, followed by ‘integrating the
sustainability agenda into businesses’ with 29.3%.
Figure 2.21: Challenges in Doing Business within a Country Where a Company Is

Located
Paying taxes 48.9%
Integrating sustainability agenda into 29.3%

business
Enforcing contracts 22.4%
Starting business 21.3%
Contracting with governments 20.1%
Closing business 14.4%
Getting credits 13.2%
Others 3.4%
Note: Q18-1. Other than the previous questions, please select any difficulties that you experience in doing business within the
country in which your company is located.
Source: Authors.
49
For respondents who selected the ‘others’ in Figure 2.21, the questionnaire also
captured details, such as ‘difficulty of obtaining a work visa for expatriates’
(Singapore), ‘strict criteria for the employment pass’ (Singapore), and ‘licenses
and other regulations are too strict’ (Indonesia).
Table 2.3 examines by country the same responses as Figure 2.21. Despite scoring
the highest in ‘integrating sustainability agenda into business’ with 33.3% of
respondents indicating this and ‘others’ with 11.1%, Singapore had fewer issues in
doing business compared to other AMS. Notably, all AMS experienced considerable
difficulties with ‘paying taxes’, except for Singapore.
Table 2.3:Difficulties in Doing Business within a Country Where a Company Is

Located by Country
Difficulty SGP MYS THA IDN PHL VNM CLM
Starting a business 8.3% 14.3% 17.4% 45.0% 23.1% 27.8% 9.5%
Integrating a 33.3% 0.0% 34.8% 45.0% 46.2% 22.2% 19.0%

sustainability agenda
into business
Getting credits 2.8% 14.3% 17.4% 15.0% 15.4% 16.7% 14.3%
Paying taxes 2.8% 57.1% 47.8% 90.0% 76.9% 55.6% 52.4%
Enforcing contracts 5.6% 14.3% 8.7% 45.0% 38.5% 27.8% 23.8%
Contracting with 8.3% 28.6% 13.0% 40.0% 23.1% 14.8% 38.1%

governments
Closing businesses 2.8% 0.0% 17.4% 15.0% 38.5% 13.0% 23.8%
Others 11.1% 0.0% 0.0% 5.0% 0.0% 0.0% 4.8%
CLM = Cambodia, Lao People’s Democratic Republic, and Myanmar (n = 21); IDN = Indonesia (n = 20); MYS = Malaysia (n =
7); PHL = Philippines (n = 13); SGP = Singapore (n = 36); THA = Thailand (n = 23); VNM = Viet Nam (n = 54).
Note: Q18-1. Other than the previous questions, please select any difficulties that you experience in doing business within
the country in which your company is located.
Source: Authors.
50
2.7.2 Business Operation in Foreign Countries
Figure 2.22 shows the percentage of respondents operating their businesses in

foreign countries. About 78.2% of respondents operated their businesses abroad.
Figure 2.22: Business Operations in Foreign Countries
Yes 78.2%
No 21.8%
Note: Q19-1. Are you operating the business in a foreign country?

Source: Authors.
2.7.3 Countries with Most Significant Difficulties in Doing Business
Figure 2.23 shows the countries with the most significant perceived difficulties in
doing business. Of the most difficult countries to do business in, Japan ranked at
the top with 16.9% of respondents citing it, followed by Myanmar with 16.2%, Viet
Nam with 8.1%, and Indonesia with 7.4%.
51
Figure 2.23: Most Significant Difficulties in Doing Business
(n=136)
Brunei Darussalam 0.0%
Cambodia 0.7%
Indonesia 7.4 %
Lao PDR 2.2%
Malaysia 4.4%
Myanmar 16.2%
Philippines 2.2%
Singapore 1.5%
Thailand 3.7%
Viet Nam 8.1%
Japan 16.9%
None of the above 36.8%

Note: Q19-2. Please indicate the specific country with the most significant difficulties in doing business (countries in ASEAN
and Japan).
Source: Authors.
Figure 2.24 indicates the perceived difficulties in doing business in the countries
selected in Figure 2.23. Amongst the difficulties, ‘trading across borders’ ranked at
the top with 36.8%, followed by ‘paying taxes’ with 33.8%.
52
Figure 2.24: Difficulties in Doing Business in the Country Selected Above
Trading across borders *1 36.8%
Paying taxes *2 33. 8 %
Others 22.1%
Enforcing contracts *3 16.2%
Employing workers *4 15.4%

business *5
Contracting with governments *6 10.3%
Getting credits *7 9.6%
Closing business *8 8.1%
Starting business *9 3.7%
Note: Q19-3. Please indicate any difficulties that you experience in doing business in the country selected above.
*1 (e.g. unclear or unofficial customs procedures, limited scope of electronic services)
*2 (e.g. complicated taxation, corruption of authorities)
*3 (e.g. complicated or inefficient judicial procedures, corruption of judicial authorities)
*4 (e.g. lack of accessibility of primary and mid education, lack of work experience)
*5 (e.g. reengineering production or procurement processes, regulatory compliance)
*6 (e.g. complicated government procurement, inequal information on bidding)
*7 (e.g., complicated or inefficient loan processes, long lead times to receive funds)
*8 (e.g. complicated or long lead times of procedures to close businesses)
*9 (e.g. time-consuming or complicated procedures)
Source: Authors.
The respondents who selected ‘others’ in Figure 2.24 provided several comments.
One respondent from Myanmar was concerned about the ‘unstable … political
situation’. One individual from Singapore mentioned that ‘different business
cultures, market participants, and regulations compared with Asia’ can be difficult.
Figure 2.25 shows that ‘trading across borders’ and ‘paying taxes’ ranked at the
top of perceived difficulties in doing business in Japan.
53
Figure 2.25: Difficulties in Doing Business in Japan from the Viewpoint of Foreign
Companies
Paying taxes *2 34.8%
Integrating sustainability agenda into

13.0%
business *4
Others 13.0%
Note: Q19-3. Please indicate any difficulties that you experience in doing business in the country selected above (Japan).
*5 (e.g. complicated or inefficient loan processes, long lead time to receive funds)
*9 (e.g. complicated or long lead time of procedures to close businesses)
Source: Authors.
Figure 2.26 shows that in Myanmar, ‘trading across borders’ ranked as the most
significant difficulty in doing business there with 50.0% of respondents indicating
this, followed by ‘enforcing contracts’.
54
Figure 2.26: Difficulties in Doing Business in Myanmar from the Viewpoint of Foreign
Companies
(n=22)

business *6 18.2%
Others 13.6%
Note: Q19-3. Please indicate any difficulties that you experience in doing business in the country selected above (Myanmar).
*3 (e.g. complicated or inefficient loan process, long lead time to receive funds)
Source: Authors.
Figure 2.27 shows that in Viet Nam, ‘paying taxes’ ranked as the most significant
difficulty in doing business by 81.8% of respondents, followed by ‘trading across
borders’.
55
Figure 2.27: Difficulties in Doing Business in Viet Nam from the Viewpoint of Foreign
Companies
(n=11)
Paying taxes *2
81.8%

27.3%
business *4
Others 18.2%
Note: Q19-3. Please indicate any difficulties that you experience in doing business in the country selected above (Viet Nam).
*2 (e.g. unclear or unofficial customs procedures, limited scope of electronic service)
*7 (e.g., time-consuming or complicated procedures)
Source: Authors.
Figure 2.28 shows that in Indonesia, ‘trading across borders’ ranked as the most
significant difficulty in doing business by 60.0% of the respondents, followed by
‘paying taxes’.
56
Figure 2.28: Difficulties in Doing Business in Indonesia from the Viewpoint of Foreign
Companies
(n=10)
Others 20.0%

business *4
0.0%
Getting credits *5
Note: Q19-3. Please indicate any difficulties that you experience in doing business in the country selected above (Indonesia).
Source: Authors.
57
2.8 Conclusion
2.8.1 Trading across Borders
The first category of questions focussed on the business environment of trading

across borders. More than half of the respondents perceived difficulties in trading
across borders, mainly due to three main factors: time-consuming manual or
on-site procedures because of the limited scope of electronic services, time-
consuming manual or on-site procedures due to unclear customs procedures,
and corruption or lack of compliance of customs officers.
Focussing on differences amongst AMS, Malaysia had the most perceived

difficulties in trading across borders compared to other countries. Malaysia was
followed by Indonesia; there was no significant difference amongst other AMS
except for Singapore. Singapore was considered to be the least difficult for trading
across borders amongst the AMS.
The construction, automotive, and wholesale trade sectors experienced more

significant perceived difficulties in trading across borders compared to other
industries. Large companies (i.e. with 300 employees or more) seemed to have
experienced slightly more difficulties in trading across borders compared to micro,
small, and medium-sized companies.
Many companies expected public institutions to solve difficulties in trading across

borders by promoting customs authority compliance, providing online services to
compare available EPAs or FTAs, and developing a reference for customs officers
to determine HS codes.
2.8.2 Human Resources Development
The second category of questions focussed on human resources. More than half
of the respondents perceived that human resources were often unable to achieve
medium- or long-term business growth goals, mainly middle management who
drives business transformation and/or innovation, and middle management who
manages existing business processes. Moreover, around 90% of respondents
pointed out the lack of skill sets expected for middle management, in particular,
leadership, strategy development, and/or business modelling and planning.
More than 60% of respondents experienced difficulties in hiring and training
new graduates and professionals due to gaps between required skill sets by the
company and educational curriculum or materials, and the lack of opportunities
for working professionals to reskill.
Companies in most AMS experienced challenges in human resources. Companies

based in Singapore – one of the most advanced countries doing business –
responded specifically that there have been difficulties in ‘hiring skilled foreign
58
workers due to strict requirements for visas or work permits’. For other AMS,
companies selected, as significant challenges, ‘gaps between required skill sets
by [the] company and educational curriculum or materials’, ‘lack of opportunities
for working professionals to reskill’, and ‘lack of experienced engineers to train
students into potential skilled workers’.
To solve difficulties in employing workers, companies expected public institutions

to encourage educational institutions to incorporate common skill sets into their
curriculum, define common skill sets to acquire before working, and enhance
human resources mobility between countries.
2.8.4 Other Issues in Doing Business
The last category of questions was on other issues in doing business. The top
two difficulties that respondents experienced in doing business were paying
taxes and integrating a sustainability agenda into business. Singapore had fewer
issues in doing business compared to other AMS. However, Singapore experienced
significant difficulty in integrating a sustainability agenda into business compared
to other countries.
About 78% of companies amongst the respondents engaged in business overseas.

When asked about the most difficult countries in which to do business, most
respondents indicated ‘none of the above’. However, Japan ranked at the top
with the most significant difficulties in doing business, especially ‘trading across
borders’. Myanmar followed with the most difficulty in ‘trading across borders’.
Viet Nam had with the most difficulty in ‘paying taxes’, and Indonesia followed with
‘trading across borders’.
59
References
IMD (2021), IMD World Digital Competitiveness Ranking 2021, Lausanne.

International Energy Agency (IEA) (2022), Southeast Asia Energy Outlook 2022,
Paris, https://www.iea.org/reports/southeast-asia-energy-outlook-2022
Lin, H.I., Y.Y. Yu, F.I. Wen, and P.T. Liu (2022), ‘Status of Food Security in East and
Southeast Asia and Challenges of Climate Change’, Climate, 10(3), p.40.
https://doi.org/10.3390/cli10030040
Organisation for Economic Co-operation and Development (OECD) (2021), Adapting
to Changing Skill Needs in Southeast Asia, Paris, https://www.oecd.org/
southeast-asia/events/regional-forum/OECD_SEA_RegionalForum_2021_
Discussion_Note.pdf
United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP)
(2022), Digital and Sustainable Trade Facilitation in the Association of
Southeast Asia Nations (ASEAN) 2021, Bangkok, https://www.unescap.org/
kp/2022/untf-survey-2021-ASEAN
World Bank (2020), Doing Business 2020, Washington, DC. https://openknowledge.
worldbank.org/bitstream/handle/10986/32436/9781464814402.pdf
60
Appendix:
Questionnaire Items and Response Number
1. Company Overview
Q1-1. Please provide your company’s name (Please provide the official name, not
an abbreviation).
Q1-2. Please provide your company URL.
Q2-1. Please provide your company telephone number (e.g. +XX-XXX-XXXX).

Q2-2. Please provide your company e-mail address (If you provide it to us, we will
send the report based on this survey to the e-mail indicated).
Q3-1. Please provide your company’s location (single choice) (Table A1.1).
Table A1.1: Please Provide Your Company’s Location
Country No. of Companies
Brunei Darussalam 0 (0.0%)
Cambodia 1 (0.6%)
Indonesia 20 (11.5%)
Lao People’s Democratic Republic 7 (4.0%)
Malaysia 7 (4.0%)
Myanmar 13 (7.5%)
Philippines 13 (7.5%)
Singapore 36 (20.7%)
Thailand 23 (13.2%)
Viet Nam 54 (31.0%)
Others 0 (0%)
Note: n = 174.
Source: Authors.
61
Q3-2. In which city is your company located? (single choice) (Table A1.2)
Table A1.2: Which City Is Your Company Located in?
Country Province or City No. of Companies
Brunei Darussalam Bandar Seri Begawan 0 (0.0%)
Kuala Belait 0 (0.0%)
Seria 0 (0.0%)
Others 0 (0.0%)
Cambodia Greater Phnom Penh Area 1 (0.6%)
Takeo 0 (0.0%)
Sihanoukville 0 (0.0%)
Battambang 0 (0.0%)
Siem Reap 0 (0.0%)
Others 0 (0.0%)
Indonesia Greater Jakarta Area 19 (10.9%)
Surabaya 0 (0.0%)
Medan 0 (0.0%)
Bandung 0 (0.0%)
Semarang 0 (0.0%)
Others 1 (0.6%)
Lao People’s Democratic Republic Vientiane 4 (2.3%)
Savannakhet 0 (0.0%)
Pakse 3 (1.7%)
62
Thakhek 0 (0.0%)
Luang Prabang 0 (0.0%)
Others 0 (0.0%)
Malaysia Greater Kuala Lumpur Area 5 (2.9%)
Kota Bharu 0 (0.0%)
Johor Bahru 0 (0.0%)
Seberang Perai 1 (0.6%)
George Town 0 (0.0%)
Others 1 (0.6%)
Myanmar Greater Yangon Area 12 (6.9%)
Mandalay 0 (0.0%)
Nay Pyi Taw 1 (0.6%)
Mawlamyine 0 (0.0%)
Taunggyi 0 (0.0%)
Others 0 (0.0%)
Philippines Greater Manila Area 8 (4.6%)
Davao City 0 (0.0%)
Budta 0 (0.0%)
Cebu City 0 (0.0%)
Zamboanga City 0 (0.0%)
Others 5 (2.9%)
Singapore Singapore 36 (20.7%)
Thailand Bangkok Greater Area 12 (6.9%)
63
Eastern Economic Corridor (Chon 6 (3.4%)

Buri, Rayong, Chachoengsao)
Udon Thani 0 (0.0%)
Nakhon Ratchasima 0 (0.0%)
Chiang Mai 0 (0.0%)
Others 5 (2.9%)
Viet Nam Greater Ho Chi Minh City Area 30 (17.2%)
Greater Ha Noi Area 16 (9.2%)
Can Tho 0 (0.0%)
Da Nang 0 (0.0%)
Hue 0 (0.0%)
Others 8 (4.6%)
Note: n = 174.
Source: Authors.
Q4. Which industry is your company’s main business? (single choice) (Table A1.3)
Table A1.3: Which Industry Is Your Company’s Main Business?
Sector No. of Companies
Administrative services 2 (1.1%)
Agriculture 1 (0.6%)
Arts and recreation 2 (1.1%)
Automotive 14 (8.0%)
Companies and enterprises 3 (1.7%)
Construction 12 (6.9%)
Educational 3 (1.7%)
64
Sector No. of Companies
Electronics 15 (8.6%)
Finance and insurance 12 (6.9%)
Health care 2 (1.1%)
Information 10 (5.7%)
Metal products 12 (6.9%)
Other manufacturing 20 (11.5%)
Other services 12 (6.9%)
Pipeline and support activities 7 (4.0%)
Postal service 3 (1.7%)
Professional services 2 (1.1%)
Real estate 5 (2.9%)
Retailers 3 (1.7%)
Utilities 2 (1.1%)
Wholesale trade 27 (15.5%)
Note: n = 174.
Source: Authors.
65
Q5. Which year was your company established? (single choice) (Table A1.4)
Table A1.4: Which Year was Your Company Established?
Country Year Company Established
Before 1950– 1960– 1970– 1980– 1990– 2000– 2010– 2020– Total
1950 1959 1969 1979 1989 1999 2009 2019 2023
Brunei 0 0 0 0 0 0 0 0 0 0
Darussalam 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%)
0 0 0 0 0 0 0 1 0 1
Cambodia 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) (0.6%) 0 (0.0%) (0.6%)
0 0 0 5 1 4 3 6 1 20
Indonesia 0 (0.0%) 0 (0.0%) 0 (0.0%) (2.9%) (0.6%) (2.3%) (1.7%) (3.4%) (0.6%) (11.5%)
Lao People’s
Democratic 1 0 0 0 0 0 2 4 0 7
Republic (0.6%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) (1.1%) (2.3%) 0 (0.0%) (4.0%)
0 0 0 0 0 2 3 2 0 7
Malaysia 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) (1.1%) (1.7%) (1.1%) 0 (0.0%) (4.0%)
2 0 0 0 0 0 0 11 0 13
Myanmar (1.1%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) (6.3%) 0 (0.0%) (7.5%)
0 0 0 2 0 5 3 3 0 13
Philippines 0 (0.0%) 0 (0.0%) 0 (0.0%) (1.1%) 0 (0.0%) (2.9%) (1.7%) (1.7%) 0 (0.0%) (7.5%)
0 0 1 11 6 6 3 7 2 36
Singapore 0 (0.0%) 0 (0.0%) (0.6%) (6.3%) (3.4%) (3.4%) (1.7%) (4.0%) (1.1%) (20.7%)
0 1 1 2 3 2 6 8 0 23
Thailand 0 (0.0%) (0.6%) (0.6%) (1.1%) (1.7%) (1.1%) (3.4%) (4.6%) 0 (0.0%) (13.2%)
0 0 0 0 1 6 22 23 2 53
Viet Nam 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) (0.6%) (3.4%) (12.6%) (13.2%) (1.1%) (31.0%)
0 0 0 0 0 0 0 0 0 0
Others 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%) 0 (0.0%)
3 1 2 20 11 25 42 65 5 174
Total (1.7%) (0.6%) (1.1%) (11.5%) (6.3%) (14.4%) (24.1%) (37.4%) (2.9%) (100.0%)
Note: n = 174.
Source: Authors.
66
Q6. What is your company’s ownership type? (single choice) (Table A1.5)
Table A1.5: What Is Your Company’s Ownership Type?
Country Year Company Established
Domestic Company Foreign-Affiliated Company Total
Brunei Darussalam 0 (0.0%) 0 (0.0%) 0 (0.0%)
Cambodia 0 (0.0%) 1 (0.6%) 1 (0.6%)
Indonesia 0 (0.0%) 20 (11.5%) 20 (11.5%)
Lao People’s
Democratic 1 (0.6%) 6 (3.4%) 7 (4.0%)
Republic
Malaysia 1 (0.6%) 6 (3.4%) 7 (4.0%)
Myanmar 1 (0.6%) 12 (6.9%) 13 (7.5%)
Philippines 1 (0.6%) 12 (6.9%) 13 (7.5%)
Singapore 6 (3.4%) 30 (17.2%) 36 (20.7%)
Thailand 6 (3.4%) 17 (9.8%) 23 (13.2%)
Viet Nam 7 (4.0%) 47 (27.0%) 54 (31.0%)
Total 23 (13.2%) 151 (86.8%) 174 (100.0%)
Note: n = 174.
Source: Authors.
67
Q7. How many regular employees work for your company? (single choice) (Table
A1.6)
Table A1.6: How Many Regular Employees Work for Your Company?
No. of employees No. of companies
< 10 27 (15.5%)
50–299 50 (28.7%)
50–299 47 (27.0%)
300–999 28 (16.1%)
1,000–4,999 16 (9.2%)
> = 5,000 6 (3.4%)

Note: n = 174.
Source: Authors.
2. Doing Business Environment – Trading across Borders

Q8. Do you have difficulties or issues in trading across borders? If you do, please
select the impact of each on profits of your business as follows: (1) high, (2)
medium, (3) low, or (4) never recognized as difficulties or issues. (single choice)
(Table A2.1)
Table A2.1: Do You Have Difficulties or Issues in Trading across Borders?
Never
Difficulties High Medium Low Recognised as
Difficulties
1. Applying favourable tariffs with

21 40 49 64
complex conditions of various EPAs
(12.1%) (23.0%) (28.2%) (36.8%)
or FTAs
2. Unexpected costs due to the lack

29 43 47 55
of customs operational standards
(16.7%) (24.7%) (27.0%) (31.6%)
on applying HS codes
3. Time-consuming manual or on-

36 45 40 53
site procedures due to unclear or
(20.7%) (25.9%) (23.0%) (30.5%)
unofficial customs procedures
4. Time-consuming manual or
on-site procedures due to limited 27 45 53 49
scope of electronic service (e.g. (15.5%) (25.9%) (30.5%) (28.2%)
paperwork on procedures remains)
68
Never
Difficulties High Medium Low Recognised as
Difficulties
5. Sudden customs shutdown in

28 37 48 61
disaster or pandemic
(16.1%) (21.3%) (27.6%) (35.1%)
6. Corruption or lack of compliance

25 46 49 54
of customs officers (e.g. facilitation
(14.4%) (26.4%) (28.2%) (31.0%)
payments)
7. Long lead time in trading due to

12 38 63 61
unconnected electronic services
(6.9%) (21.8%) (36.2%) (35.1%)
between countries
EPA = economic partnership agreement, FTA = free trade agreement,

HS = Harmonized System.
Note: n = 174.
Source: Authors.
Q9-1. Please select the initiatives that you expect public institutions to take to solve
the difficulties (multiple choice). (Table A2.2)
Table A2.2: Please Select the Initiatives You Expect Public Institutions to Take to
Solve the Difficulties
Initiative No. of responses
1. Extend coverage of ASEAN Single Window 57 (32.8%)
2. Provide online service to compare

70 (40.2%)
conditions of available EPAs or FTAs
3. Develop operation continuity plan under

50 (28.7%)
disaster or pandemic scenario by government
4. Develop reference or case study for customs

60 (34.5%)
officers to determine HS codes
5. Promote improving customs authority

81 (46.6%)
compliance
69
Initiative No. of responses
6. Others 6 (3.4%)
7. No particular expectation 37 (21.3%)
ASEAN = Association of Southeast Asian Nations, EPA = economic partnership agreement, FTA = free trade agreement,
HS = Harmonized System.
Note: n = 174.
Source: Authors.
Q9-2. Please add your comments on the initiatives that you expect public
institutions to take to solve the difficulties (if any). (Table A2.3)
Table A2.3: Please Add Your Comment on the Initiatives You Expect Public
Institutions to Take to Solve the Difficulties or Issues
Comments
1. Improve network infrastructure for electronic services (Indonesia).

2. Clarify customs clearance for goods, especially dangerous goods (Philippines).
3. Create an online portal to check customs procedures for export shipments to various ports
or countries (Singapore).
4. Clarify and simplify licenses and applications for customs clearance of chemicals (Viet
Nam).
5. Make clear standards on legal interpretation. Currently, legal interpretations amongst
provinces differ, making it difficult to obtain various approval from different provinces (Viet
Nam).
Source: Authors.
3. Doing Business Environment – Employing Workers
Q10. Do the following human resources lack in your company to achieve medium-
or long-term business growth? If so, please indicate to what extent your company
lacks for each human resources as follows: (1) mostly, (2) partially, (3) slightly, or
(4) never recognized the lack. (single choice) (Table A3.1)
70
Table A3.1: Do the Following Human Resources Lack in Your Company to Achieve
Medium- or Long-Term Business Growth?
Never
Human Resources Mostly Partially Slightly Recognized the
Lack
1. Labourers dedicated to 16 33 45 80
manual work (e.g. factory (9.2%) (19.0%) (25.9%) (46.0%)
or construction operation)
2. Non-management white-collar 20 55 51 48
(e.g. knowledge or office workers (11.5%) (31.6%) (29.3%) (27.6%)
in charge of daily operations)
3. Middle management of existing 31 72 35 36

business processes (e.g. managing (17.8%) (41.4%) (20.1%) (20.7%)
quality, cost, or delivery)
4. Middle management who 57 58 30 29

drives business transformation (32.8%) (33.3%) (17.2%) (16.7%)
or innovation (e.g. new business
planning or development,
transforming existing business,
business process improvement)
Note: n = 174.
Source: Authors.
Q11. Do you have difficulties in hiring or training new graduates and professionals?
Please select the impact of each on the profits of your business as follows: (1)
high, (2) medium, (3) low, or (4) never recognized as difficulties or issues. (single
choice) (Table A3.2)
71
Table A3.2: Do You Have Difficulties or Issues in Hiring or Training New Graduates
and Professionals?
Never
Human Resources Mostly Partially Slightly Recognized the
Lack
1. Lack of accessibility to formal 17 42 44 71

education to obtain necessary (9.8%) (24.1%) (25.3%) (40.8%)
knowledge for work (e.g. primary, mid,
or higher education)
2. Lack of experienced engineers to train 21 56 47 50

students into potential skilled workers (12.1%) (32.2%) (27.0%) (28.7%)
3. Gaps between required skill sets 23 70 50 31

by your company and educational (13.2%) (40.2%) (28.7%) (17.8%)
4. Lack of work experience for students 14 57 60 43

to sublimate their knowledge to (8.0%) (32.8%) (34.5%) (24.7%)
practical work (e.g. internships)
5. Lack of opportunities for working 20 62 58 34

professionals to reskill (11.5%) (35.6%) (33.3%) (19.5%)
6. Cultural or geographical barriers to 10 34 74 56

access job information for workers (e.g. (5.7%) (19.5%) (42.5%) (32.2%)
gender or religious barriers)
7. Inability to hire skilled foreign workers 19 44 55 56

due to strict requirements for visas or (10.9%) (25.3%) (31.6%) (32.2%)
work permits
Note: n = 174.
Source: Authors.
72
Q12-1. Please select the initiatives that you expect public institutions to take to
solve the difficulties (multiple choice). (Table A3.3)
Table A3.3: Please Select the Initiatives You Expect Public Institutions to Take to
Solve the Difficulties
Initiative No. of Responses
1. Define common skill sets to acquire before working (e.g. 74 (42.5%)

communication skills or other skills widely required by
companies for workers)
2. Encourage educational institutions to incorporate 82 (47.1%)

common skill sets into their curriculum or materials
3. Increase compatibility of qualifications or degrees in 36 (20.7%)

ASEAN or internationally to identify potential foreign workers
4. Enhance human resources mobility between countries 66 (37.9%)

(e.g. ease requirements for visas or work permits)
5. Provide equal educational opportunities by digital 45 (25.9%)

devices (i.e. reducing educational disparities caused
by internet environment, language, or economic gaps)
6. Strengthen or enhance higher technical education leveraging 41 (23.6%)

foreign experienced engineers
7. Facilitate international working experience for students or 41 (23.6%)

international personnel exchange for professionals
8. Others 2 (1.1%)

Note: n = 174.
Source: Authors.
73
Q12-2. If you selected ‘Others’ in the previous question, please add your comments
on the initiatives that you expect public institutions to take to solve the difficulties
(if any). (Table A13)
Comments
1. Labour laws are not in line with actual implementation.

Initiatives are needed to carry out activities that eliminate
the gap between the public appearance of the labour law
and its actual implementation (Viet Nam).
2. Courses should be created on the various common

software used by companies. For example, it is easy
to hire someone with ‘shipping experience’; however,
shipping documents are generated from our off-the-shelf
software system, and it is difficult to find someone who has
experience in using the system (Singapore).
Source: Authors.
Q13. Please indicate the degree of shortage of the following skills required for
middle management to drive business transformation or innovation (single
choice): (1) mostly, (2) partially, (3) slightly, or (4) never recognised the shortage.
(single choice) (Table A3.5)
Table A3.5: Please Indicate the Degree of Shortage of the Following Skills Required
for Middle Management to Drive Business Transformation or Innovation
Never
Skills Mostly Partially Slightly Recognized the
Lack
1. Business ideation (e.g. 41 78 36 19

creativity, expertise in (23.6%) (44.8%) (20.7%) (10.9%)
digitalized business)
2. Leadership (e.g. ability 56 80 28 10

to energize colleagues or (32.2%) (46.0%) (16.1%) (5.7%)
stakeholders, lead the team,
74
Never
Skills Mostly Partially Slightly Recognized the
Lack
3. Strategy development or 62 60 36 16
business modelling and planning (35.6%) (34.5%) (20.7%) (9.2%)
(e.g. judgment in any business
activities)
4. Operation or infrastructure 25 65 60 24
development (e.g. expertise in (14.4%) (37.4%) (34.5%) (13.8%)
business activities, including back
office)
5. Business or operation 40 70 44 20
improvement (e.g. improving (23.0%) (40.2%) (25.3%) (11.5%)
developed business or operation)
Note: n = 174.
Source: Authors.
Q14. Please add your comments on the reason why you think so, and specify the
skills required. (Table A3.6)
Table A3.6: Please Add Your Comments on the Reason Why You Think So, and
Specify the Specific Skills Required
Comments
1. In the Lao PDR, advanced equipment, machinery, and even consumables – such as jigs
and tools – are often of low quality. There is little demand for them, and the variety of
products is limited. Therefore, these must be imported from neighbouring countries. We need
creative managers who can plan procurement and explain why the procurement is needed.
Leadership is also an essential ability to operate the factory smoothly (Lao PDR).
2. Managers often quickly forget what they have learned, are unable to use what they have
learned in their actual work, or take no initiative. The ability to think deeply, systematically,
and logically is needed (Malaysia).
3. Logical thinking is crucial, as is the PDCA improvement cycle. Managers should be willing
to promote innovation and improvement in other departments by enlarging their scope (Viet
Nam).
75
Comments
4. Due to the difference in company cultures, there is lack of knowledge of the business
processes of the parent company in Japan (Philippines).
5. Managers need to think and to act on their own instead of waiting for instructions. They
lack basic skills. It is unclear whether this is due to their education or whether upper-level
management positions have traditionally only given instructions to others. They lack
leadership and planning and strategy formulation skills (Thailand).
6. Veteran managers who joined at the start of operations are already in their 16th year;
perhaps they feel that improvement in their abilities is sluggish. It is thus necessary
to provide continuous education on how to manage policy (Hoshin Kanri). Education
is necessary to increase the expertise of each department – e.g. quality, production
technology, maintenance, accounting, and general affairs (Viet Nam).
7. Managers have no concern for promoting team members (Indonesia).
8. Many young people in Myanmar display certificates of various training courses (e.g. MS
Office or English language), but their actual ability is very low. More practical trainings are
required (Myanmar).
9. Business changes so fast, and there is no time to experiment. Skilled managers are needed
to drive businesses and innovation (Thailand).
10. Managers should have the ability to translate strategies into action plans and to
communicate them to employees (Singapore).
11. There is a local education problem (Singapore).
12. In Singapore, it is no problem to hire operational staff members who are expected to
work on existing standards, but it is very difficult to hire talented ones who think of new
businesses or take on a leadership role – especially with our standard salary level. Their
salary expectations are very high, so they tend to work in finance, consulting, or government
(Singapore).
76
Comments
13. Managers are deficient in IT knowledge (Singapore).
14. Managers need to improve their subordinates’ leadership and management skills
(Singapore).
15. Few people want to increase their income, because they have no ambition or desire to
advance in their careers (Myanmar).
16. Managers are often corrupt (Viet Nam).
17. It may be Myanmar’s culture, but we are unable to see proactive proposals from
managers – this could be due to a lack of knowledge or capability (Myanmar).
18. Few managers can think and act on their own (Viet Nam)
19. Since there are specific issues in Viet Nam such as lack of LNG, there are often
misunderstandings between Japanese headquarters and domestic managers (Viet Nam).
20. The skill to manage a cross-departmental project, or company-wise project, is lacking

(Myanmar).
21. Our business depends solely on HQ direction and has few opportunities to launch or to
develop strategies by ourselves. Therefore, our middle managers follow their Japanese
bosses without submitting their opinions (Thailand).
22. We want to diagnose our business problems, but there are no human resources who can
do this (Thailand).
77
Comments
23. Almost all managers focus on short-term targets; they do not have enough experience to
consider a long-term strategy. They lack the foresight to improve daily operations. Because
wages are still lower than those of other countries, whole departments are easy to dismiss
and to replace (Viet Nam).
24. Machine technology is needed (Indonesia).
25. Managers are hesitant to provide ideas or show leadership in the company (Thailand).
26. Managers’ lack of logical thinking and inability to categorise issues by importance are
serious problems. Most university graduates do not have such fundamental capabilities or
even realise that they are capabilities to acquire (Viet Nam).
27. Local people have a lack of cultural consensus to work for companies (Viet Nam).
28. Managers have little ability and/or experience to think on their own; they need creativity
and originality (Viet Nam).
29. Managers are poorly trained to foresee upcoming tasks (Viet Nam).
Source: Authors.
78
4. Doing Business Environment – Innovation
Q15. Are you interested in corporate activities to create innovative products or

services with digital technology? Please select the social agendas based on your
interest (multiple choice). (Table A4.1)
Table A4.1: Are You Interested in Corporate Activities to Create Innovative Products
or Services with Digital Technology?
Topics Activities No. of Responses
1. Business process and 1.1 Upgrading production (e.g. agriculture, fisheries) 42 (24.1%)
product innovation
1.2 Upgrading sales and marketing 93 (53.4%)
1.3 Upgrading administrative operations (e.g. human 118 (67.8%)

resources, accounting)
1.4 Smart finance (e.g. online payment, cloud funding 48 (27.6%)

or lending)
1.5 Not interested 12 (6.9%)
2. Mobility 2.1 Commuting 48 (27.6%)
2.2 Smart logistics 77 (44.3%)
2.3 Supply chain resilience 77 (44.3%)
3. Environment and 3.1 Sustainable energy 107 (61.5%)
energy
3.2 Energy management 75 (43.1%)
3.3 Circular economy 61 (35.1%)
3.4 Sustainable tourism 9 (5.2%)
4. Safety and security 4.1 Smart security (e.g. security system for privately 79 (45.4%)
owned home, or city)
4.2 Cybersecurity 120 (69.0%)
4.3 Disaster management 80 (46.0%)
79
Topics Activities No. of Responses
5. Living and health 5.1 Smart cities, buildings, or homes 79 (45.4%)
5.2 E-commerce (e.g. super-app) 50 (28.7%)
5.3 Smart health care (e.g. telemedicine) 65 (37.4%)
5.4 Well-being (e.g. daily health care management) 72 (41.4%)
6. Government and 6.1 E-government 92 (52.9%)
education
6.2 Inclusive education systems 60 (34.5%)
Note: n = 174.
Source: Authors.
Q16-1-1. (Collecting necessary information) Do you have difficulties in creating

innovative products or services? Please select difficulties in the categories below
(single choice). (Table A4.2)
Table A4.2: Do You Have Difficulties in Creating Innovative Products or Services?
Never Recognized as
Difficulties High Medium Low difficulties or issues
1. Lack of innovative business ideas 37 71 44 22

or technical seeds (21.3%) (40.8%) (25.3%) (12.6%)
2. Lack of information on market 27 87 37 23

demands or customer needs (15.5%) (50.0%) (21.3%) (13.2%)
3. Lack of information on competitors 27 85 42 20

(15.5%) (48.9%) (24.1%) (11.5%)
4. Lack of available partners (e.g. 34 56 58 26

companies, academic institutions, or (19.5%) (32.2%) (33.3%) (14.9%)
government)
5. Lack of available mentors to seek 22 48 73 31

for advice (12.6%) (27.6%) (42.0%) (17.8%)
Note: n = 174.
Source: Authors.
80
Q16-1-2. (Collecting necessary information) For the previous answers, please let
us know why you think so. (Table A4.3)
Table A4.3: Please Let Us Know Why You Think So
Comments
1. There are few official internet articles and information sources. Even if we ask a consulting
company in Lao PDR to provide information, we cannot obtain the information that we need
due to its poor research capabilities. There are no international exhibitions or trade fairs
for innovative technologies held in Lao PDR. If necessary, more useful information can be
obtained by collecting information at an exhibition in Thailand, whose scale is different (Lao
PDR).
2. In Malaysia, there are many people who are satisfied with the current situation and believe
that it should continue. There is no one who will champion a business idea (Malaysia).
3. Market information is not organised to cover everything (Philippines).
4. Head office functions include a development department and an overseas sales

department, and the overseas subsidiaries manufacture and sell products. Since this
function is left to the head office, I do not feel the need to innovate (Viet Nam).
5. I can manage most tasks since I have been in this country for decades. Yet it is still difficult
to collect necessary information easily (Myanmar).
6. The most important thing for innovation is information, but it is lacking in Singapore
(Singapore).
7. There are no vendors with technical capabilities (Singapore).
8. There is no education regarding advanced technology (Myanmar).
9. Information collection is difficult due to lack of sales and marketing staff (Myanmar).
10. There is separation from the international community (Myanmar).
11. There are few opportunities to acquire new knowledge, and self-development cannot be
expected (Thailand).
12. Although anybody can supposedly access general information, details are difficult to
retrieve (Viet Nam).
Source: Authors.
Q16-2-1. (Funding) Do you have difficulties in creating innovative products or

services? Please select difficulties in the categories below (single choice) (Table
A4.4)
81
Table A4.4: Do You Have Difficulties in Creating Innovative Products or Services?
Never Recognized as
Difficulties High Medium Low difficulties or issues
1. Shortage of internal capital or 22 31 52 69

investment budget (12.6%) (17.8%) (29.9%) (39.7%)
2. Inaccessible loans due to strict 13 27 58 76

bank loan conditions (7.5%) (15.5%) (33.3%) (43.7%)
3. Few or limited access to cloud 8 21 50 95

funding or lending (4.6%) (12.1%) (28.7%) (54.6%)
4. Few or limited access to investors 7 18 5 94

or venture capital (4.0%) (10.3%) (31.6%) (54.0%)
5. Lack of information or advice on 6 29 58 81

fundraising (3.4%) (16.7%) (33.3%) (46.6%)
Note: n = 174.
Source: Authors.
Q16-2-2 (Funding) For the previous answers, please let us know why you think so.
(Table A4.5)
Table A4.5: Please Let Us Know Why You Think So
Comments
1. Internal company issues (Philippines)
2. No worries about funding (Viet Nam)
3. We have enough financial injections from the head office (Myanmar).
4. Almost all foreign companies have given up investing in Myanmar (Myanmar).
5. Restrictions on international remittances (Myanmar)
6. No investment plans (Thailand)
7. Not interested in subject (Viet Nam)
Source: Authors.
82
Q17-1. Please select the initiatives that you expect institutions to take to create
innovation (multiple choice) (Table A4.6)
Table A4.6: Please Select the Initiatives You Expect Institutions to Take to Create
Innovation
Initiatives No. of Responses
1. Financial support (e.g. loans from government financial 56 (32.2%)

institutions, tax incentives, subsidies)
2. Acceleration or incubation programs 34 (19.5%)
3. Support for intellectual property rights (e.g. consultation 41 (23.6%)

services, support, or lectures on patent application)
4. Provide guidelines in innovation activities (e.g. know- 54 (31.0%)

how to collaborate with external parties, contract-related
matters, funding)
5. Regulatory support (e.g. a sandbox to deregulate the 67 (38.5%)

application of regulations on technology to encourage
companies to create innovation)
6. Support business expansion globally or collaboration 72 (41.4%)

overseas (e.g. matching with experts)
7. Commendation (e.g. government awards for business 13 (7.5%)

or CEOs)
8. Others 2 (1.1%)
Note: n = 174.
Source: Authors.
Q17-2. Please elaborate the public initiatives that would be helpful to have (if any).
(Table A4.7)
83
Table A4.7: Please Elaborate the Public Initiatives that Would Be Helpful to Have
Comments
1. International exhibitions (e.g. mechanical equipment, technology, tools) that invite

companies from neighbouring countries (Lao PDR)
2. Human resources development that can bring about innovation (Thailand)
3. When I try to start a new business, I am not able to proceed due to strict regulations, such
as business licensing for foreign companies. I would like to see deregulation (Indonesia).
4. Establish a support platform that details customs requirement for exports (e.g. all goods
must be packed in fumigated pallets, packing lists require a net weight for each item, or
invoices must show the net weight of each size) (Singapore).
5. Myanmar needs good instructors and persons who can share their experiences
(Myanmar).
6. Both have different goals (Singapore).
7. No support system (Myanmar)
8. Need to relax of customs regulations to create new logistics businesses (Myanmar)
9. Relax restrictions on foreign investment (Myanmar)
Source: Authors.
5. Doing Business Environment – Others in Doing Business
Q18-1. Other than the previous questions, please select any difficulties that you
experience in doing business within the country in which your company is located
(multiple choice). (Table A5.1)
Table A5.1: Please Select Any Difficulties or Issues You Experience in Doing Business
within the Country in Which Your Company Locates
Difficulties No. of Responses
1. Shortage of internal capital or investment budget 37 (21.3%)
2. Integrating a sustainability agenda into businesses 51 (29.3%)

(e.g. reengineering production or procurement processes,
regulatory compliance)
3. Getting credits (e.g. complicated or inefficient loan 23 (13.2%)

process, long lead time to receive funds)
4. Paying taxes (e.g. complicated taxation, corruption of 85 (48.9%)

authorities)
84
5. Enforcing contracts (e.g. complicated or inefficient judicial 39 (22.4%)

procedures, corruption of judicial authorities)
6. Contracting with governments (e.g. complicated 35 (20.1%)

government procurement, inequal information on bidding)
7. Closing businesses (e.g. complicated or long lead time of 25 (14.4%)

procedures to close businesses)
8. Others 6 (3.4%)
9. No particular issues 38 (21.8%)
Note: n = 174.
Source: Authors.
Q18-2. If you selected ‘Others’ in the previous question, please specify the difficulties
that you experience in doing business within the country in which your company is
located (if any). (Table A5.2)
Table A5.2: Please Specify the Difficulties That You Experience in Doing Business
within the Country in Which Your Company Is Located
Comments
1. After the coup d’état, construction work has been suspended, and the military government
has forced the conversion of foreign currency (Myanmar).
2. Difficulty of getting visas for expatriates (Singapore)
3. Licenses and other regulations are too strict (Indonesia).
4. Difference in culture and skill level (Singapore)
5. Strict criteria for employment passes (Singapore)
6. Labour cost, access to foreign manpower, inward policy (Singapore)
Source: Authors.
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Q19-1. Are you operating the business in a foreign country? (single choice) (Table
A5.3)
Table A5.3: Are You Operating Businesses in Foreign Countries?
Operating Businesses in Foreign Countries No. of Companies
Yes 136 (78.2%)

No 38 (21.8%)
Note: n = 174.
Source: Authors.
Q19-2. (If yes,) Please indicate the specific country with the most significant
difficulties in doing business (countries in ASEAN and Japan) (single choice).
(Table A5.4)
Table A5.4: Please Indicate the Specific Country with the Most Significant Difficulties
in Doing Business
Country No. of Companies
Brunei Darussalam 0 (0.0%)
Cambodia 1 (0.7%)
Indonesia 10 (7.4%)
Lao People’s Democratic Republic 3 (2.2%)
Malaysia 6 (4.4%)
Myanmar 22 (16.2%)
Philippines 3 (2.2%)
Singapore 2 (1.5%)
Thailand 5 (3.7%)
Viet Nam 11 (8.1%)
Japan 23 (16.9%)
None of the above 50 (36.8%)
Note: n= 136.
Source: Authors.
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Q19-3. Please indicate any difficulties that you experience in doing business in the
country selected above (multiple choice). (Table A5.5)
Table A5.5: Please Indicate Any Difficulties You Experience in Doing Business in the
1. Trading across borders (e.g. unclear or unofficial 50 (36.8%)

customs procedures, limited scope of electronic
service)
2. Employing workers (e.g. lack of accessibility 21 (15.4%)

of primary and mid education, lack of work
experience)
3. Starting business (e.g. time-consuming or 5 (3.7%)

complicated procedures)
4. Integrating sustainability agenda into business 17 (12.5%)

(e.g. reengineering production or procurement
processes, regulatory compliance)
5. Getting credits (e.g. complicated or inefficient 13 (9.6%)

loan process, long lead time to receive funds)
6. Paying taxes (e.g. complicated taxation, 46 (33.8%)

corruption of authorities)
7. Enforcing contracts (e.g. complicated or inefficient judicial 22 (16.2%)

procedures, corruption of judicial authorities)
8. Contracting with governments (e.g. complicated 14 (10.3%)

government procurement, inequal information on bidding)
9. Closing businesses (e.g. complicated or long 11 (8.1%)

lead time of procedures to close businesses)
10. Others 30 (22.1%)
Note: n = 174.
Source: Authors.
87
Q19-4. If you selected ‘Others’ in the previous question, please specify any
difficulties that you experience in doing business in the country selected above.
(Table A5.6)
Table A5.6: Please Specify Any Difficulties That You Experience in Doing Business in
the Country Selected Above
Comments
1. Unwillingness of the counterparty (i.e. distributor) to disclose information (Singapore)
2. No issues (Singapore)
3. No issues (Viet Nam)
4. No issues (Philippines)
5. No issues (Thailand)
6. Money collection (Singapore)
7. Differences between systems in different countries (Others)
8. Different business culture, players, regulations compared with Asia (Singapore)
9. FATF, banking system (Singapore)
10. Not so difficult to arrange logistics services to and from other ASEAN countries and Japan
(Myanmar)
11. Political situation is unstable (Myanmar).
12. Strong competitor in Indonesian market (Viet Nam)
13. Malay (language), market price (Indonesia)
14. Foreign money exchange, remittance issues (Viet Nam)
Source: Authors.
88
CHAPTER 3
ASEAN–Japan Cooperation
in the New Emerging Agenda
Keita Oikawa (Economic Research Institute for ASEAN and East Asia [ERIA]),
Venkatachalam Anbumozhi (ERIA),
Lurong Chen (ERIA),
Christopher L. Hardesty (UCL Global Business School for Health),
Fusanori Iwasaki (ERIA),
Takuma Kato (ERIA),
Michikazu Kojima (ERIA and Institute of Developing Economies–Japan
External Trade Organization [IDE-JETRO]),
Masanori Kozono (ERIA),
Fumitaka Machida (ERIA),
Melanie S. Milo (Consultant),
Asuka Nagatani (ERIA),
Han Phoumin (ERIA),
Kei Sudo (ERIA),
Aladdin D. Rillo (ERIA),
and Rashesh Shrestha (ERIA)
3.1 Introduction
This chapter reviews the achievements of cooperation between the Association

of Southeast Asian Nations (ASEAN) and Japan and studies potential benefits
and opportunities in the new emerging agenda, including supply chain resilience,
digitalisation, smart cities, the circular economy, agriculture, health care,
sustainable energy, sustainable tourism, and human capital development. It is
organised as follows. In Section 2, Keita Oikawa writes about the importance of
building an end-to-end supply chain data ecosystem to strengthen supply chain
resilience in East Asia. In Section 3, with the new ASEAN–Japan Comprehensive
Economic Partnership (AJCEP), Lurong Chen emphasises the importance of
improving connectivity, facilitating trade liberalisation in services, and fostering
regulatory harmonisation between ASEAN and Japan. In Section 4, Venkatachalam
Anbumozhi and Fumitaka Machida review the ASEAN Smart Cities Network (ASCN)
and a smart city supported by Japan and ASEAN, stressing the importance of a
human-centric perspective in the future collaboration of ASEAN and Japan in such
initiatives. In Section 5, Masanori Kozono summarises the history of ASEAN–Japan
cooperation in the food and agriculture sectors and suggests a future direction for
the cooperation. In Section 6, Christopher L. Hardesty, Asuka Nagatani, and Takuma
Kato detail the collaboration between ASEAN and Japan regarding developing
universal health coverage (UHC) in ASEAN and introduce efforts of the Economic
Research Institute for ASEAN and East Asia (ERIA) towards building a health care
ecosystem in Asia for UHC.
89
In Section 7, Kei Sudo and Han Phoumin evaluate recent ASEAN–Japan collaboration
on energy, highlighting the range of cooperation that encompasses financial,
technological, and human resources development towards a sustainable energy
future in the ASEAN region. In Section 8, Aladdin D. Rillo and Melanie S. Milo examine
sustainable tourism in ASEAN, while drawing on the experience of Japan to offer
valuable insights. In Section 9, Fusanori Iwasaki and Michikazu Kozima propose
policy recommendations for building a circular economy with ASEAN–Japan
cooperation. Their recommendations draw on Japan’s experience in waste
management and aim to foster sustainable and efficient use of resources. Finally,
in Section 10, Rashesh Shrestha notes the lack of a skilled workforce in the ASEAN
region and advocates for a collaborative effort between ASEAN and Japan in the
field of secondary and post-secondary education, leveraging Japan’s advanced
educational resources.
3.2. Supply Chain Resilience: Building an End-to-End Supply Chain

Data Ecosystem
3.2.1. Competitive International Production Networks in East Asia
East Asia has used globalisation extensively in its development strategy during the
last 3 decades. Since the 1990s, ‘Factory Asia’ – international production networks
(IPNs) constructed in East Asia – has led the world in the development of competitive
and resilient production networks and has weathered several economic crises
and natural catastrophes. In 2008–2009, the Asian financial crisis caused a trade
collapse, but the sophisticated IPNs in East Asia have since recovered (Ando and
Kimura, 2012; Okubo, Kimura, Teshima, 2014). Then, during the sluggish trade period
of 2011–2016, the growth of international trade slowed relative to the growth of the
global gross domestic product (GDP), but IPNs in East Asia continued to expand
(Obashi and Kimura, 2018). Moreover, Factory Asia's proportional relevance to the
world has increased over time, notably in the production of general and electrical
machinery.
IPNs in East Asia have most recently shown their robustness and resilience during
the COVID-19 pandemic. For example, although the pandemic originally brought
about negative impacts on machinery exports, by October 2020, these had
recovered to 2019 levels (Ando and Hayakawa, 2021). The decline in exports in East
Asia was substantially less severe than in North America or Europe; notably, East
Asian exports of general and electrical equipment stayed almost at 2019 levels in
April and May 2020 (Ando and Hayakawa, 2021). ERIA studied enterprises in ASEAN
Member States (AMS) and India, discovering that many Asian firms responded
swiftly and actively to pandemic shocks, frequently earning a profit during the
pandemic’s height (Oikawa et al., 2021).
90
Japan has been key to building these competitive, robust, and resilient IPNs in East
Asia. In fact, Japan’s outward foreign direct investment (FDI) to ASEAN accounted
for the largest share of Japan’s FDI in Asia and the Pacific (Figure 3.1)
Figure 3.1: Japan’s Outward Foreign Direct Investment in Asia and the Pacific
(FDI Stock in US$ billion)
600
500
U S$ BIL L ION
400
300
200
100
0
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
ANZ CHINA KOREA ASEAN
ANZ = Australia and New Zealand, ASEAN = Association of Southeast Asian Nations.
Sources: Bank of Japan, Direct Investment Position, https://www.boj.or.jp/en/statistics/br/bop_06/bpdata/index.htm, and
author.
Maintaining and strengthening the competitiveness of IPNs in East Asia is an

essential part of development strategy, including that of ASEAN and Japan (Han,
2022). To do so, current global trends around supply chain issues must be identified.
3.2.2. Major Trends Affecting the Competitiveness of Supply Chains in East Asia
Supply chains are becoming much more complicated and are confronting
various challenges because of three trends. The first trend is the rising diversity of
consumers and the technological advancement of industry. With diversification
of customer preferences, supply chains have become more intricate with the
customisation of goods and services and recognition of digital-purchasing
patterns. In addition, as product life cycles become shorter and products more
technologically advanced, distinct supply chain models are necessary. The
second trend is a rise in supply chain risks. Companies are more concerned about
supply chain disruptions caused by, for example, global pandemics, large-scale
91
earthquakes, and the Russian invasion of Ukraine. Moreover, disputes between
economic giants, such as that between the United States and China, are extending
a destabilising element to supply chains. The third trend is the emergence of
new social values, as governments and consumers are becoming more aware of
social concerns, such as the environment and human rights. Thus, environmental
regulations, human rights measures, and climate change now all have an impact
on business activity.
In particular, the issue of carbon neutrality will shape future supply chains. Initiatives
to achieve carbon neutrality have been strengthened in various countries, such as
through the European Green Deal. Also, the Government of Japan announced a
decarbonisation policy, aiming for zero greenhouse gas emissions by 2050 (Prime
Minister’s Office of Japan, 2020). As many companies are now monitoring carbon
emissions across the entire supply chain, they must reconfigure all business
activities towards decarbonisation.
Indeed, environmental regulations are another important issue for future supply
chains. Regulations on chemicals contained in products have been strengthened
in various countries, such as the Restriction of Hazardous Substances Directive
and the Regulation for the Registration, Evaluation, Authorisation and Restriction
of Chemicals in Europe. Regulations regarding water and air pollution have also
been strengthened, and companies now must comply with green procurement
standards.
The United Nations approved Guiding Principles on Business and Human Rights
in 2011. Successively, principles and various associated legislation have been
implemented around the world, especially in Europe. Confirmation of human rights
protections in business partners are increasingly required through corporate social
responsibility (CSR) questionnaires, voluntary audits, and external audits. Unjust
treatment of immigrant workers and use of child labour often lead to boycotts all
over the world.
92
3.3 Digitalisation: A New ASEAN–Japan Comprehensive Economic
Partnership (AJCEP)
This section details ideas to upgrade the current AJCEP regarding digitalisation.
3.3.1. Improving Connectivity
The new AJCEP should aim to improve connectivity between ASEAN and Japan.
It should facilitate investment in physical infrastructure in the ASEAN region, as
improvement in the quality of services is directly linked to the quality of overall
connectivity. Japan has set aside $110 billion for infrastructure improvement in
ASEAN (MOFA, 2015); it should also continue to provide low interest rate loans or
other forms of financial assistance to AMS in support of infrastructure projects. In
many AMS, capacity and resources are limited, but enhancing regional cooperation
will provide a solution for better connectivity.
3.3.2. Trade Liberalisation in Services
Trade liberalisation in services should be another focus of the new AJCEP. Services
have extensive implications on digital transformation in Asia. First, development
of the services sector will create more jobs to absorb labour. Second, services
efficiency will save trade costs, increase product and trade reliability, and
promote e-commerce activities. Third, the resulting increase in government
revenue will provide additional resources to further improve infrastructure and
thus connectivity.
Emerging services intermediaries can lead this trade liberalisation. Digitalisation

will generate more business opportunities for downstream companies in materials
suppliers, market investigations, software development, shipment and delivery,
agency operations, search for key words, and optimisation. As production network
clustering around upstream core e-commerce actors begins to deepen and to
spread, this will lead to a finer division of labour and therefore a higher degree of
specialisation. With such market segmentation, demand will be more precisely
identified; thus, more services activities will find space for expansion. Enhancing
ASEAN–Japan relations will fuel the market engine to foster the growth of trade in
services.
93
3.3.3. Promoting Regulatory Harmonisation
The online marketplace needs rules and regulations to ensure free data flow
as well as fair play, competition, and security. Internationally, digital trade has
promoted the formation of global governance on digital trade. These new rules
and regulations then influence the development of the digital economy. However,
current progress in multilateral trade negotiations cannot catch up to the radical
growth of the digital economy. The new AJCEP should therefore pilot new rules
making.
The growth of ASEAN has proven the importance of adopting policies in favour of
globalisation and trade facilitation. Actions to remove tariff or non-tariff barriers
and to simplify customs, inspection, and taxation procedures will promote
digitalisation and expand global value chains. Moreover, Japan has been active
in international rules setting on trade and investment. Enhancing bilateral
relations between AMS and Japan can help both sides learn from each other and
jointly resolve difficulties in customs clearance, exchange settlements, and tax
reimbursements that create barriers to trade. Reaching region-wide regulatory
harmonisation on digital trade will also help ASEAN ensure that its voice is heard.
3.4. Smart Cities: An ASEAN–Japan Innovation Partnership
At the 32nd ASEAN Summit in 2018, ASEAN leaders established the ASCN, a
collaborative platform where cities from the 10 AMS work towards the common goal
of smart and sustainable urban development. The 26 ASCN pilot cities selected are
Bandar Seri Begawan, Bangkok, Banyuwangi, Battambang, Cebu City, Chonburi, Da
Nang, Davao City, DKI Jakarta, Ha Noi, Ho Chi Minh City, Johor Bahru, Kota Kinabalu,
Kuala Lumpur, Kuching, Luang Prabang, Makassar, Mandalay, Manila, Nay Pyi Taw,
Phnom Penh, Phuket, Singapore, Siem Reap, Vientiane, and Yangon.
Considering the opportunities and challenges posed by rapid urbanisation and

digitalisation in Asia, the primary goal of the ASCN is to improve lives, using
technology as an enabler. By focussing on people, the ASCN adopts an inclusive
approach to smart city development that is respectful of human rights and
fundamental freedoms as inscribed in the ASEAN Charter. The networking of smart
cities across ASEAN also contributes to enhancing mutual understanding across
cultures. The ASCN aims to facilitate cooperation on smart city development,
catalyse bankable projects with the private sector, and secure funding and
support from ASEAN external partners such as Japan. To this end, 33 partnerships
have been established thus far.
Japan's commitment to the ASCN has been outstanding; since 2019, Japan has
been hosting the ASCN High-Level Meeting and supporting collaboration and
partnerships amongst the 26 cities. In addition, based on the Smart City Supported
by Japan ASEAN Mutual Partnership (Smart JAMP) programme launched at the
ASCN High-Level Meeting in 2020, the Government of Japan is supporting smart
94
city projects in the region by soliciting proposals for project formation studies from
the 26 pilot cities. With AMS pushing ahead, the Smart JAMP could help guide the
ASCN throughout its lifespan.
Below, the six action clusters of the ASCN are explored: (i) sustainable cities and
smart built environments; (ii) integrated technology infrastructure and process
for smart services delivery; (iii) smart urban mobility; (iv) sustainable business/
extended enterprise models; (v) smart people; and (vi) integrated planning, policy,
standards, and regulations. Through these six action clusters, the ASCN aims to
improve the quality of life of ASEAN citizens; reach an environmental, low-carbon
energy transition and climate targets; make cities more competitive and better
places to live; increase the competitiveness of ASEAN and Japanese industries
and innovative small and medium-sized enterprises (SMEs); hear knowledge to
replicate success and to prevent mistakes from being repeated; and support cities
in finding the right partners and investment solutions for digital technologies.
3.4.1. Sustainable Cities and Smart Built Environments

The main challenges in creating a sustainable and smart environment at the
city level is to reduce energy use, environmental impacts, and carbon footprints;
foster competitive industries for jobs and growth; and ensure societal and social
development and the well-being of citizens. The investment needed to improve
energy efficiency, generate low-carbon energy, modernise infrastructure, and
create high-quality living environments is enormous in ASEAN. Cities have limited
access to planned financial resources for systemic change, which requires the
activation of private capital combined with public investment. The ASEAN–Japan
partnership will recognise that every city is unique and give stakeholders the tools
needed to make appropriate systemic or individual decisions and to facilitate
solutions. It will also provide a large-scale launching ground for new Japanese
concepts to test in and to unleash onto the ASEAN markets and to test and to
implement new financial products and models.
3.4.2. Integrated Technology Infrastructure and Process for Smart Services

Delivery
Significant – and yet insufficiently tapped – value is offered by integrating various

existing social and new digital infrastructure networks within and across cities (i.e.
energy, transport, or communications) rather than duplicating these needlessly.
This point applies to both active and passive infrastructure. Ageing budgets
to replace them are stretched beyond capacity, and projects are procured
and managed in silos. The potential afforded to cities through new joined-up
approaches, exploiting modern digital technologies, is substantial. However, it will
take sustained commitment from multiple parties to access value. The ASEAN–
Japan partnership will search out smaller, innovative cities within the ASCN that
can rapidly advance and ‘design for small’ rather than accept designs made for
95
large. The target and focus for this initiative are still in formation; however, the
initially agreed action is around circular cities and low-carbon cities, engaging a
group of 10 ASEAN ‘small giants’.
3.4.3. Smart Urban Mobility
Significant – and yet insufficiently tapped – value is offered by integrating various

existing social and new digital infrastructure networks within and across cities (i.e.
energy, transport, or communications) rather than duplicating these needlessly.
This point applies to both active and passive infrastructure. Ageing budgets
to replace them are stretched beyond capacity, and projects are procured
and managed in silos. The potential afforded to cities through new joined-up
approaches, exploiting modern digital technologies, is substantial. However, it will
take sustained commitment from multiple parties to access value. The ASEAN–
Japan partnership will search out smaller, innovative cities within the ASCN that
can rapidly advance and ‘design for small’ rather than accept designs made for
large. The target and focus for this initiative are still in formation; however, the
initially agreed action is around circular cities and low-carbon cities, engaging a
group of 10 ASEAN ‘small giants’.
3.4.4. Sustainable Business and Extended Enterprise Models
To become ‘smart’, the ASCN needs responsive business models and adaptive
funding. The new challenges facing cities require new business models, finance
and funding instruments, and procurement schemes. This means establishing a
dialogue between the public and private sectors to identify and to remove any
obstacles in the way of the smart city market. This action cluster will provide a
platform where local authorities, financial institutions, businesses, SMEs, and other
relevant actors can work together. The ASCN will use this platform as a focal
point for the gathering and sharing of information about innovative business and
procurement models. The platform will give future smart city aspirants better
access to financial instruments, providing invaluable knowledge about financing
and funding opportunities by directly engaging the financial community.
3.4.5. Smart People
In a time of urban transformation and the digitalisation of smart cities, too

little attention is sometimes given to citizens. A people-focussed strategy
and partnership strongly believes in citizens as the fundamental actors for the
regeneration and development of smart cities. Civic engagement, empowerment,
participation, and co-creation are at the basis of the ASEAN–Japan partnership,
since ASEAN and Japan acknowledge that citizen voices are pivotal in providing
demand-side pressure on the government, service providers, and organisations
to encourage a full response to actual citizen needs. Empowerment also ensures
the establishment of a trusted relationship with local governments and is a source
of democratic legitimacy and transparency.
96
3.4.6. Integrated Planning, Policy, Standards, and Regulations
Innovative forms of smart city policies, standards, and regulations are needed
to enable the large-scale implementation and roll-out of smart cities. New
governance concepts are required to coordinate and to integrate smart city
stakeholders – cities, businesses, and various organisations – within the change
process to identify strengths, weaknesses, opportunities, and threats. The ASEAN–
Japan partnership will identify new forms of governance and policy concepts to
further the process of becoming a sustainable, inclusive smart city. Under this action
cluster, the ASCN will work with Japanese cities, businesses, research institutes,
and academia to build smart, inclusive, and sustainable cities. Partnership efforts
towards the implementation and design of smart city strategies will include
making the best use of various capacities, monitoring tools, and measuring tools
and enabling knowledge sharing and replication of successful smart cities.
3.4.7. Conclusion
One of the most important concepts in a smart city is social inclusion

and a citizen-driven approach. If a technology-driven smart city is the
main goal, communities may end up being controlled by surveillance, for
example. A citizen-driven approach, in general, refers to social capital
that enhances trust, concern for one’s associates, and cooperation.
Discussing the concept of a citizen-driven approach for smart cities
in this way will contribute towards the continuous enhancement of the
smartness of communities in Asia.
Indeed, the global trend in smart cities is shifting from a technology-

to a people-driven approach, and democratic, inclusive, and resident-
centred urban development is now required. Advanced efforts in Japan
are being made to realise not only liveability but also the well-being of
a diverse range of people. As cities in ASEAN still face many challenges
– such as the need for basic infrastructure development and an
insufficient response to digitalisation, they have tended to lean towards
technology-led urban development. However, the unique people-
centred social characteristics of ASEAN itself have increased interest
in citizen-driven city planning; Japan has also embraced this ideal
through the concept of Society 5.0, a human-centered, ‘super smart’
society that balances economic advancement with the resolution of
social issues through a system that integrates cyberspace and physical
space.
The challenge of realising democratic, inclusive, and resident-centred

urban development unique to Asia has begun. ERIA, in collaboration
with Kyoto University and various universities in AMS, has organised
the Asian Inclusive Smart Cities (AISC) conference to discuss related
issues. Now is the time to showcase city planning projects that respect
97
Asian values and involve the business community, including the development of
new city evaluation indicators and standardisation.
3.5. Food and Agriculture: ASEAN–Japan Cooperation
ASEAN–Japan cooperation in the food and agriculture sector occurs through the
ASEAN ministers of agriculture and forestry and the ministers of agriculture and
forestry of China, Japan, and Korea, known as AMAF+3. The framework for AMAF+3
was established in 2001, and the first AMAF+3 meeting was held in 2001 in Indonesia
(ASEAN, 2001). Since then, the AMAF+3 meeting has been held annually.
Before the establishment of the AMAF+3 framework, Japan’s agricultural
cooperation in AMS was mostly implemented in the form of bilateral cooperation
between each AMS and Japan. For example, in Indonesia, Japan’s bilateral
cooperation in the agriculture sector there had been conducted since the 1960s,
which focussed on growing agricultural production through support for irrigation.
At the first AMAF+3 meeting in 2001, the criteria for ASEAN regional projects were
adopted. Projects should be regional in nature and of benefit to AMS, and projects
should be implemented with the participation of as many AMS as possible, but
these projects should involve, at a minimum, participation by any two AMS and
China, Japan, or Korea. These criteria remain valid.
Areas of cooperation have changed, however. At the first AMAF+3 meeting, there
were six areas of cooperation: regional food security, research and development,
human resources development, coordination and cooperation in international and
regional issues, agriculture information network, and trade facilitation. Since then,
the areas of cooperation have been updated to nine within the framework of the
ASEAN Plus Three Cooperation Strategy on Food, Agriculture and Forestry (APTCS)
2016–2025 (ASEAN Secretariat, 2017). The current strategic areas of cooperation
are in Table 3.1.
98
Table 3.1: Strategic Areas of Cooperation, ASEAN Plus Three Cooperation Strategy
on Food, Agriculture and Forestry, 2016–2025
Area Area of cooperation
1 Strengthening Food Security
2 Biomass Energy Development
3 Sustainable Forest Management
4 Climate Change Mitigation and Adaptation
5 Management of Animal Diseases and Plant Pests
6 Enhancement of Capacity-Building and Human Resources Development
7 Enhancement of Productivity, Quality, and Marketability of Agriculture Products
8 Strengthening of Information and Knowledge Networking and Exchange
9 Strengthening Collaboration on Research and Development

Source: ASEAN Secretariat (2017).
Some features of ASEAN–Japan cooperation in food, agriculture, and forestry can

be identified through a comparative analysis based on information collected from
each year’s summary record of the Special Senior Officials Meeting of the AMAF+3
(Figure 3.2).
Figure 3.2: ASEAN–Japan Cooperation Projects on Food, Agriculture, and Forestry
30
27
24
21
18
Number
15
of Projects
12
9
6
3
0
2016 2017 2018 2019 2020 2021 2022
Year
ST 1 ST 2 ST 3 ST 4 ST 5 ST 6 ST 7 ST 8 ST 9

Source: ASEAN Secretariat (2017).
99
In 2016, the first year of the APTCS 2016–2025, ASEAN–Japan cooperation projects
only numbered 9, but this drastically increased to 29 in 2022. Furthermore,
capacity-building and human resources development, as well as information
and knowledge networking and exchange, have consistently been the focus of
cooperation. Collaboration on research and development is rising. This move is
consistent with the focus of Japan's recent cooperation strategy with ASEAN that
emphasises innovation.
Two other important initiatives have been undertaken to strengthen regional food
security since the establishment of AMAF+3. The first is the ASEAN+3 Emergency
Rice Reserve (APTERR) and its preparatory stage, including the East Asian
Emergency Rice Reserve pilot project. The APTERR was established in 2013 as a
permanent mechanism and aims to strengthen food security, alleviate poverty,
and eradicate malnourishment amongst its members (i.e. AMS plus China, Japan,
and Korea) without distorting normal trade. Under the APTERR, the rice reserve
is available through a three-tier programme; the last tier is designed for acute
emergencies and other humanitarian responses. The second initiative is the
ASEAN Food Security Information System (AFSIS), which began in 2003 and has
been implementing projects to strengthen food security in the region through
the systematic collection, analysis, and dissemination of data related to food
security in the ASEAN region. Japan has been continuously supporting these two
key initiatives with Thailand.
3.5.1. Direction of Policy and Strategy towards Sustainable Agriculture and Food
Systems
In Japan, to realise both an increase in productivity and sustainability in the food,

agriculture, forestry, and fishery industries through innovation, Measures for the
Achievement of Decarbonization and Resilience with Innovation (MeaDRI), which
is a medium- to long-term strategy, was developed in 2021 (MAFF, 2021). The
MeaDRI is expected to pave the way towards the development of a resilient and
sustainable food system, more specifically by increasing the productivity of food
and agriculture while reducing the environmental load by promoting innovation.
In ASEAN, ASEAN Regional Guidelines for Sustainable Agriculture in ASEAN:

Developing Food Security and Food Productivity in ASEAN with Sustainable and
Circular Agriculture1 was adopted in 2022. The guidelines address the challenges
that agriculture is facing and raises 28 key strategies to address them, including
improving soil health, valorising agricultural waste biomass and food waste,
reducing greenhouse gases from agriculture-related activities, promoting the use of
smart and precision agriculture systems, and reducing reliance on agrochemicals.
The guidelines are expected to facilitate the transformation of ASEAN agriculture
into a highly productive, economically viable, and environmentally sound system.
1
The document is available at the ASEAN Secretariat.
100
These policy and strategy directions of Japan and ASEAN indicate a similarity of
focus, such as the promotion of sustainable agriculture and food systems. More
specifically, they both aim to improve agricultural production and productivity
while reducing the environmental load.
3.5.2. Priority Areas for Food and Agriculture Cooperation
At the latest AMAF+3 meeting held on 26 October 2022, Japan proposed new
initiatives for ASEAN–Japan cooperation in the food and agriculture sector,
known as the Midori Cooperation Plan (MAFF, 2022). Japan will focus on building
a resilient and sustainable agricultural production system through innovation
towards ensuring regional food security. Specific areas of cooperation are
the (i) development, demonstration, and dissemination of technologies for
building a resilient and sustainable production system through innovation, such
as technologies enhancing smart/digital agriculture, the circular economy,
and biomass energy; (ii) human resources development for building resilient
and sustainable agriculture and food systems; and (iii) other support for the
implementation of the ASEAN Regional Guidelines for Sustainable Agriculture in
ASEAN. Also, the Midori Cooperation Plan emphasises public–private partnerships
to utilise the technical and financial capabilities of the private sector. AMS expressed
their support for Japan’s proposal, with the expectation for the implementation of
specific projects.
In the joint press statement of this latest AMAF+3 meeting, the following cooperation
areas were highlighted: promoting green, sustainable, and circular agriculture and
sustainable forest management; reducing the use of harmful agrochemicals in
the agriculture sector; promoting nature-based solutions, decarbonisation efforts,
and digital technology application in agriculture and forestry; and promoting
biological control agents in animal husbandry and aquaculture (ASEAN, 2022).
There are many similarities in terms of possible cooperation areas between
Japan’s Midori Cooperation Plan and key priority areas for ASEAN cooperation
stated in the joint press statement.
3.5.3. Enhancing ASEAN–Japan Cooperation for Food and Agriculture
Towards the realisation of more resilient and sustainable agriculture and food
systems in AMS, development and dissemination of innovative technologies
should be prioritised as indicated in the Midori Cooperation Plan. Indeed, ongoing
projects, such as the Greenhouse Gas Mitigation in Irrigated Rice System in Asia
(MIRSA) initiative, Accelerating Application of Agricultural Technologies That
Enhance Resilient and Sustainable Agriculture and Food Systems in the Asia
Monsoon Region programme, and a smart agriculture pilot project, are expected
to facilitate the dissemination of innovative technologies and to be scaled up in
the future. As each AMS’s priorities – as well as policy and technical circumstances
for application of innovative technologies – differ, however, it must be recognised
that there is no ‘one-size-fits-all’ solution for the entire ASEAN region.
101
In addition, human resources development for those engaged in activities to
realise resilient and sustainable agriculture is essential. Current projects, such as
one focussed on farmer organisations to support the development of food value
chains in AMS (i.e. the CBF Project), a human resources development project in
food-related areas through partnership programmes with universities in ASEAN
(i.e. the HRD Project), and a project for enhancing the understanding of good
agricultural practices (i.e. the GAP project), do feature ASEAN–Japan cooperation.
Many ASEAN officials and stakeholders have already been trained thanks to these
projects, which have, in turn, been highly evaluated. These projects should be
continued.
ASEAN–Japan cooperation on facilitating the implementation of the ASEAN

Regional Guidelines for Sustainable Agriculture in ASEAN needs to be intensified;
the Green Asia Project, newly initiated by the Japan International Research
Center for Agricultural Sciences (JIRCAS), could support such implementation.
This project focusses on sharing information on basic agricultural technologies
for sustainable agricultural efforts in the Asia monsoon region. Additionally, ERIA
began a new research project on building and enhancing sustainable agriculture
and food systems in AMS with contributions from Japan. Through a scoping study,
key priority issues and strategies in each AMS will be identified, as well as readiness
for implementing the ASEAN Regional Guidelines for Sustainable Agriculture in
ASEAN. Findings should be reported to related ASEAN sectoral bodies, which will
then help formulate accurate action plans for implementation of the guidelines in
each AMS.
Recent external shocks, such as the COVID-19 pandemic and escalation of various
geopolitical tensions, have adversely affected food security globally and regionally,
resulting in food price hikes. The APTERR has been key to ensuring regional food
security against a short-term crisis in terms of rice supply. It released 7,138 metric
tonnes of rice from Japan and Korea to address the emergency, including the
pandemic, in Cambodia, Lao People’s Democratic Republic (Lao PDR), Myanmar,
and the Philippines. As the APTERR mechanism functioned well during this short-
term crisis, expansion of its target commodity to another key crops – other than
rice – should be discussed.
Finally, as the number of ASEAN–Japan cooperation projects has been increasing

and areas of cooperation are becoming diversified, the establishment of a new
framework for the AMAF+Japan should be considered to enhance food and
agriculture cooperation, apart from the current AMAF+3 framework. As ASEAN–
Japan cooperation will celebrate its 50th anniversary in 2023, the first meeting of
AMAF+Japan should be held during this year.
102
3.6. Health Care: Towards Achieving the Universal Health Coverage
Vision in ASEAN2
3.6.1. Less than 10 Years Remaining to Achieve the Vision
UHC means that all individuals and communities receive health care services and
associated products that they need, without suffering financial hardship. UHC
includes the full spectrum of essential, quality health care, ranging from prevention
to treatment, rehabilitation, and palliative care across the life cycle. Importantly,
UHC emphasises not only what services are covered but also how they are funded,
managed, and delivered (WHO, 2021). Achieving UHC became a global priority
when all nations committed to the Sustainable Development Goals (SDGs) in 2015,
of which SDG 3 specifically pertains to UHC. Led by the World Health Organization
(WHO), various initiatives have been established to see this vision achieved by the
2030 deadline, including UHC2030, P4H Network, and UHC Partnership (World Bank,
2022). Household health care expenditures continue to impoverish an estimated
90 million people globally every year, a situation which was further highlighted by
the COVID-19 pandemic (Tediosi et al., 2020).
There is no single template for achieving UHC. WHO set out 16 essential topics
across 4 categories as leading indicators: maternal and child health, infectious
diseases, non-communicable diseases, and broader capacity and access
schemes such as health care worker density. The key metrics aligned to the
SDGs pertain to population access to essential, quality health care services, and
household expenditures required for the same. Ultimately, however, stakeholders
agree that every country’s culture is unique; therefore, UHC practices need to be
tailored to each.
2
This section was made possible through collaboration with and reporting of the ASEAN Secretariat, particularly
the Health Division Team under Cluster 3. The authors wish to thank the Secretariat, AMS, and other public–private
stakeholders for their contributions: Eduardo Banzon, health specialist, Asian Development Bank; Edward Booty,
chief executive officer, Reach52; Probir Das, group executive officer, Terumo Corporation; Brent Denning, ASEAN
regional head, Docquity; Hinoshita Eiji, assistant minister for global health and welfare, Ministry of Health, Labour
and Welfare, Government of Japan; Steven Graaff, founder, Good Practice; Chris Humphrey, executive director,
EU-ASEAN Business Council; Dennis Jacobus, managing director, Diagnos Laboratorium; Shige Kanao, health care
and medical business unit leader, Marubeni; Daniel Kastner, chief transformation officer, Bumrungrad International
Hospital; Nikki Kitikiti, vaccines policy lead for emerging markets, Takeda; Feisal Mustapha, Disease Control Division,
Ministry of Health, Government of Malaysia; Minh Nguyen, Viet Nam senior country lead, Allianz Partners; Clive
Tan, integrated care, Singapore National Healthcare Group; and Itani Tetsuya, director, Office of Global Health
Cooperation, Ministry of Health, Labour and Welfare, Government of Japan.
103
That said, as countries around the world are in varying stages of UHC maturity,
there is a great opportunity to learn from one another. For example, Japan has
achieved excellent health care outcomes since its focus on UHC, which dates
to the implementation of social insurance in 1961. This effort was decades in the
making, evolving out of revisions to community-based health care programmes
and encouragement of employers to take more accountability for protecting
their workers. Importantly, Japan demonstrated stable leadership for UHC and
timed the inputs and outputs for its health care reform with broader socio-
economic planning. Indeed, investment in health is an investment in wealth; it
is no coincidence that Japan’s UHC achievement coincided with the Japanese
Economic Miracle.
3.6.2. ASEAN’s March towards Providing Health for All
ASEAN’s growth and size outpace much of the rest of the world, with the 10
AMS representing nearly 10% of the global population; the ASEAN economy is
projected to be the fourth largest in the world by 2050. The region is facing several
demographic and epidemiological headwinds, however. AMS will officially become
aged societies within the next decades, and they will lose 9 million lives annually
due to chronic diseases while also representing 27% of such cases around the
globe (Humphrey et al., 2020).
Despite the 250% increase in public health care expenditures in AMS, government
strategies across ASEAN remain varied, and outcome measures like life expectancy
and UHC index scores are low. Other indicators – such as insufficient child
immunisation rates, limited preventative health budgets, and more generally,
a focus on low-cost measures rather than on rewarding innovation – are
symptomatic of the low 5% GDP allocation that goes to health care (i.e. about
half of the global average) in the region. There are infrastructure challenges as
well, such as the lack of about 5 million requisite health care workers, revenues
well below the 15% tax–GDP target, and largely informally employed populations.
Ultimately, this has led to out-of-pocket (OOP) expenditures on health care to
be 30% or more of total (Table 3.2), which is working against UHC and broader
socioeconomic development ambitions (Humphrey et al., 2020).
104
Table 3.2: ASEAN Member States and Others, Health Statistics
Country Health Expenditure Average Life Expectancy Out-of-Pocket Costs

(% of GDP) (years) (% of total health care
expenditures)
Indonesia 2.90 72 34.76
Malaysia 3.83 76 34.57
Philippines 4.08 71 48.56
Singapore 4.08 84 30.15
Thailand 3.79 77 8.67
Viet Nam 5.25 75 42.95
Germany 11.70 81 12.82
Japan 10.74 85 12.91
United Kingdom 10.15 81 17.07
ASEAN = Association of Southeast Asian Nations, GDP = gross domestic product.

Source: Humphrey et al. (2020).
AMS have stepped up over the past few years to tackle these challenges. The
ASEAN Declaration on Strengthening Social Protection was established in 2015
(ASEAN Secretariat, 2013) in line with the SDGs, which was then elaborated by
a regional framework and action plan with the goal of improving the quality of
life by 2025 (ASEAN Secretariat, 2015). ASEAN, moreover, created the ASEAN Post-
2015 Health Development Agenda, 2021–2025, under which the Cluster 3 team is
specifically targeting progress in strengthening health systems and access to
care (i.e. UHC). Areas of focus within Cluster 3 include reproductive health, migrant
health, pharmaceuticals, human resources, financing, and, increasingly, digital
health (ASEAN Secretariat, 2021).
The past few decades have indeed witnessed a decline in poverty, emergence of
a middle class, and a welcome increase in government health care investment.
Particularly strong investment increases (in double digits) have been observed
in Indonesia, Viet Nam, and the Philippines, where very large population sizes –
impacted by the aforementioned demographic and epidemiological challenges
– necessitate a greater focus on health care. These emerging countries are
taking lessons from the long-established UHC scheme in Thailand, where OOP
expenditures dropped from more than 20% to 8% or less (Cui, Cassidy, Hendrajaya,
2017). While Indonesia, Viet Nam, and the Philippines still see 30% OOP expenditures,
expectations are for a dramatic decline with their rollouts of UHC (Cui, Cassidy,
Hendrajaya, 2017).
UHC penetration rates elsewhere in AMS are much lower (Table 3.3), the UHC
service coverage index scores still remain closer to 50%. However, initiatives
such as Myanmar Health Vision 2030 are bringing associated discussions to the
105
forefront. Towards this, the ASEAN Secretariat has documented UHC best practices
from across the region thus far, providing practical solutions for such countries in
areas such as health care facility infrastructure (urban as well as rural), health
care worker upskilling and task-shifting, and service package strategies that
encourage both integration and accountability of health care (Cui, Cassidy,
Hendrajaya, 2017; ASEAN Secretariat, 2019a).
Table 3.3: Breakdown of Indicators and Universal Health Coverage Efforts in ASEAN
Country Population GNI per Capita UHC Service Insurance Coverage Summary
(million, 2018) ($, 2018) Coverage Index (% of total of UHC
(out of 100, 2015) population, 2019) Commitment
Brunei 0.4 National welfare

31,020 >80 100.0
Darussalam
Commitment to
Cambodia 16.1 1,380 55 37.5 move towards
UHC
UHC began in
Indonesia 267.7 3,840 49 84.0 2014
Commitment
Lao PDR 7.1 2,460 48 94.0 by 2020
UHC using single public provider

Malaysia 31.5 10,460 70 100.0 and general government budget
since 1980s
Commitment to strengthen
Myanmar 53.7 1,310 59 2.0 health system to support
UHC
Philippines 106.7 3,830 58 78.0 Expansion of national health

insurance by national/local
government and PhilHealth
benefits package
Singapore 5.6 58,770 >80 93.0 UHC though national

programmes of MediSave,
MediShield, and MediFund
since 1980s
Thailand 69.4 6,610 75 100.0 UHC since 2002
Viet Nam 94.7 2,590 73 89.9 Resolution of Central Committee

of the Communist Party of Viet
Nam has committed to move
towards UHC. Social health
insurance is targeted at 95%
coverage by 2015.
ASEAN = Association of Southeast Asian Nations, GNI = gross national income, Lao PDR = Lao People’s Democratic Republic,
UHC = universal health coverage.
Note: These figures are in process of being refreshed for the current decade.
Source: ASEAN Secretariat (2019b).
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According to various public and private stakeholders who are actively involved in
UHC efforts in the region, a few challenges still stand out:
(i) Foundational elements are lacking that inhibit the progress of health care.
Examples include internet access and modernised payment systems,
especially for the rising middle class.
(ii) Financing is a resounding theme across a range of dimensions, from
medicine reimbursement to furnishing of health care commodities to even
health care worker salaries. Stakeholders are calling for more sustainable
and efficient financing models – which are seen as an investment akin to
that in the education sector – to maximise resources. These improvements
must also be clearly communicated and understood by the population.
(iii) At the same time, health care needs to continue to evolve. There must be
increasing focus on harnessing the momentum of improved health care
literacy following the COVID-19 pandemic as well as on broader well-being
initiatives, necessitating a whole-of-government approach. Of particular
importance is overcoming the inequities that exist in accessing high-quality
health care, such as in rural and low-income areas.
(iv) Countries that have been successful with achieving UHC have done so by
executing a stable, long-term vision. Despite political uncertainties in AMS,
UHC requires leadership that remains committed to the cause over the next
decade to see the ambition realised.
(v) The private sector stands ready to support AMS governments. UHC may be
difficult to achieve without public–private partnerships, which means more
collaboration from the beginning to the end of key programmes, as well as
transparency along the way. There is a shared vision to reduce burdens on
health care settings and to improve affordability for UHC.
3.6.3. Recommendations
Despite the challenges, a spirit of progress remains towards achieving UHC in AMS,
and the public as well as private stakeholders are aligned in their views about
opportunities for collaboration. The ASEAN Secretariat has been proactive in
reaching out to and learning from other regions that have achieved UHC. Japan,
for instance, is a UHC model that demonstrates a manageable GDP allocation to
health care of about 11%, OOP expenditures of about 13%, a UHC coverage index
score of 83 out of 100, and average life expectancy of 85 years (Hardesty et al.
2021).
ASEAN and Japan are celebrating 50 years of collaboration in 2023, including

through the Japan–ASEAN Health Initiative, which aims to support AMS in creating
vibrant and healthy societies (ASEAN Secretariat, 2022). In 2014, at the 17th Japan–
ASEAN Summit, an agreement was made to jointly train 8,000 new health care
workers in topics like disease prevention and quality standards. Then, at the 2015
forum, the Japan–ASEAN Integration Fund was established as a platform for
sharing of experiences, such as those tackling the rise in lifestyle-related disease
107
patterns. Ageing societies are another commonality, given that Japan became an
aged society over a 24-year period, while ASEAN is on track to become the same
in only 15 years (Mission of Japan to ASEAN, 2016).
Once the SDGs were established, ASEAN and Japan committed to the ASEAN–
Japan UHC Initiative to jointly achieve the 2030 UHC objective (MHLW, 2017). At the
ASEAN–Japan Health Ministers’ Meeting on UHC held in 2017, topics included the
impacts of population ageing, as connected to the new United Nations Decade
of Healthy Ageing framework and involving a site visit to Kanagawa Prefecture’s
Life Innovation Centre, as well as strategies for diversifying UHC funding streams,
which are used to reduce OOP expenditures (WHO, 2017). More recently, Japan
contributed $50 million to the ASEAN Centre for Public Health Emergencies and
Emerging Diseases associated with the efforts to combat the COVID-19 pandemic
(MOFA, 2020).
To continue to drive progress forward on UHC, opportunities in AMS can be

prioritised into five high-level areas:
(i) Improve health care coverage rates of the population, while maintaining
administrative efficiencies and preparing for mandatory premium
contributions.
(ii) Commit to a dual, long-term strategy of developing the health care
workforce, including cross-border, while also digitalising patient-facing and
back-office infrastructure.
(iii) Explore alternative and more sustainable financing arrangements for ASEAN
populations, leveraging best practices (as well as investments) from abroad
and from other sectors.
(iv) Build consolidated health care data flows across ASEAN, allowing stakeholders
better insights to work together to tackle non-communicable as well as
infectious disease challenges.
(v) Achieve the above through public–private collaborations, embracing
elements of choice for the emerging middle class and harnessing the trust
developed (e.g. in supply chains).
Beyond the above, all ecosystem stakeholders must support ongoing research
endeavours for UHC in AMS. A prior call for research themes for AMS, as led by
the WHO Centre for Health Development in Japan (also known as the WHO Kobe
Centre), highlighted areas such as new services delivery configurations, alternative
funding models, healthy ageing, task shifting of human resources, and evaluation
techniques for innovation. This research spans governments, the private sector,
and academia, from Japan to ASEAN, towards the UHC 2030 ambition.
Given the situations in Japan and the ASEAN region, the following themes and
viewpoints could be raised for further collaboration on UHC.
(i) For the short- to long-term, data must be collected regularly and shared with
the public so that every stakeholder can review progress. As some health
108
data are also useful for the research and development of medicines and
medical devices, they can likewise be considered part of the collaboration
amongst governments, academia, and the private sector. Japan could
support these data collection and sharing activities in the ASEAN region with
ERIA.
(ii) In addition to UHC, Japanese initiatives are expected on the topics of ageing,
antimicrobial resistance, and the ASEAN Centre for Public Health Emergency
and Emerging Diseases. To strengthen these three pillars, the Japan and
ASEAN health ministers’ meetings should resume. Discussions on the centre
would be a welcome agenda item for the Government of Japan, since the
rough framework of support from Japan has been already determined,
although its operation scheme is still unclear.
(iii) Building the collaboration scheme between the public and private sector is
necessary. To provide long-term care for as many people as possible, for
example, the private sector must be utilised. Research and development on
antimicrobials and to ensure supply chain of medical devices or medicine
are additional significant topics for collaboration.
Table 3.4: Recommendations for Government
No Recommendation Details
1 Evolve UHC schemes to align to • Consider a composite approach

modernised demographic and of existing UHC scheme options
epidemiological needs. For example, available.
Japan deployed a composite • Ramp up coverage penetration,
approach, in a stepwise manner, including for the informal sector
while keeping premiums low for and for primary/outpatient care.
those who were socio-economically • Aim for administrative
disadvantaged. The key was keeping efficiencies.
eligibility and collections data current, • Start preparing for the shift
while taking a long-term yet agile view towards mandatory UHC
in seeking inputs. enrolments.
2 Focus on boosting the health • Set up or promote a regional

care workforce while embracing talent exchange programme
a technology strategy. Regional (including Japan and ASEAN) to
disparities, within and across AMS, offer training opportunities.
affect patient outcomes, and often a • Leapfrog the UHC model
bottleneck is the shortage of health through technology, including
care workers. Cloud technology, base enablers such as internet
for example, is projected to derive access and mobile wallets.
significant savings for AMS over • Continue digitalisation in areas
the next 5 years (ACCESS Health like cloud, electronic medical
International, 2022). records, and low-bandwidth
health care apps (e.g. for
109
telehealth, decentralised patient

education, even social media).
• Take an example from Viet
Nam, which issued 97 million
digitalised social security
numbers through the VssID
mobile app, positioning the
country to revolutionise the
insurance process under UHC
design.
• Leverage benefits of these
programmes in the form of data
collection, helping provide the
insights and investment cases
needed to construct policies
and to monitor implementation
outcomes more effectively.
3 Tackle lifestyle and chronic diseases, • Consider how to equip more

an inevitable need for AMS as their institutions with faculty to
economies develop. boost the number of available
physicians.
• Prepare the primary care
community for more specialty
training, a proven technique
in Japan. For example, for
diabetes, this means providing
educational materials and
incentivising wearable
technologies for improved data
sharing.
• In more niche domains like
rare diseases and cancers,
consider increasing screening
and establishing cross-
border specialist-to-specialist
networks.
4 Step up preventative efforts for • Increase the availability and

infectious diseases, which will continue access to immunisation
to be a challenge for AMS. programmes, one of the most
cost-effective public health
interventions available. For
example, in Japan, the Ministry
of Health, Labour, and Welfare
collaborates with the Ministry
of Education on vaccine
awareness programmes.
• Ensure that vaccine records
become digitised over time,
helping governments track
and manage future outbreak
scenarios.
110
5 Utilise public–private partnerships • Lean on the private sector for

to achieve the UHC commitment. In global best practices, including
Japan, for example, a UHC success in areas such as supply chains
factor was the government working and logistics (as observed
with private primary care providers, during the COVID-19 pandemic).
such as small hospitals, to manage the • Align models for privatised
demand on the system. provision of health care services,
which ASEAN populations will
begin to seek out as the middle
class develops.
• See the private sector as a
source of innovation and a
financial contributor, in terms
of taxation, employment, and
other joint investment schemes.
• Undertake a new flagship
programme, such as
establishing a national
preventative care centre, to
share lessons beyond AMS and
to train the next generation of
leaders.
AMS = ASEAN Member States, ASEAN = Association for Southeast Asian Nations, UHC = universal health coverage.
Source: Authors.
Table 3.5: Recommendations for the Private Sector and Academic Collaboration on
Universal Health Coverage
1 Bring creativity to financing solutions, • Consider how to utilise private

given the UHC resourcing challenges insurance, traditionally under-
faced by AMS governments. penetrated, as a form of financial
security to the populations on
the basis that necessary medical
care is publicly provided.
• Consider social impact bonds.
For example, in Hiroshima
Prefecture in Japan, these
bonds were used to increase
the rate of colorectal cancer
screenings, leading to savings in
downstream medical expenses
and ultimately a return to private
investors.
111
• Leverage public–private
financial schemes from abroad,
which could be tailored to the
UHC context in AMS.
2 Invest beyond health care into wider • Seek, where possible, to localise
GDP and socioeconomic development. research, production, and
employment activities.
• Partner with international
development agencies and
non-traditional new entrants
who have like-minded UHC
goals.
• Leverage the public–private
trust that developed during
the COVID-19 pandemic, for
example, on supply chains.
• Deploy business models that
can develop and harness an
emerging middle class expected
to have greater demands on the
health care system.
3 Align to health system reforms. • Topics include ongoing

campaigns in AMS for
increasing health care literacy,
encouraging preventative
health behaviours, and enabling
capabilities like self-care.
• Bring technology expertise
to areas such as internet
penetration and health care
infrastructure, like cloud and
digitised patient recordkeeping.
• Lead by example to help UHC
programmes achieve scale. For
example, in Japan, employers
are obliged to provide annual
medical check-ups for
employees.
4 Construct and contribute to • Bring best practices to digital

consolidated health care database transformation, such as
initiatives. AMS are expected to harnessing data repositories
move quickly on this topic as a UHC for use in policy design and
leapfrogging imperative. evaluation.
• Other examples include
integration of vaccine records,
new-born screening to triage
abnormalities earlier in life, and
algorithms for data generated
from wearable technologies
(e.g. identification of disease risk
factors).
112
5 Maximise available resources and • Provide administrative support

enable health system efficiency to in areas such as maintaining
overcome workforce deficiencies. population eligibility information,
collecting coverage premiums,
and potentially serving as an
intermediary reimbursement
vehicle.
• Establish close relationships
between payer and provider
organisations, which
enable the public sector to
prevent overtreatment and
rehospitalisation and the private
sector to provide managed
services across the patient
life cycle as additional value
through consolidation.
• Iterate programme
improvements with the public
sector by ramping up monitoring
and evaluation efforts.
AMS = ASEAN Member States, ASEAN = Association of Southeast Asian Nations, UHC = universal health coverage.
Source: Authors.
ERIA Activities to Accomplish the Universal

Health Coverage Vision
Fumitaka Machida and Takuma Kato, ERIA
Japan has strong research capability, universal access to quality

health care services, personnel with high morale, and industries such as
pharmaceutical companies that rank third globally in originating top-
selling drugs. Japan was, in fact, one of the first countries to achieve
universal health coverage, which developed even under the economic
slowdown of the past 30 years. This has been made possible by the strong
ecosystem of collaboration amongst industry, government, academia,
and medicine.
Yet it has also proven difficult to create the synergy that allows stakeholders
in the sector to work together for more efficient and effective health
services delivery, research and development, regulation, production,
national economy, and health diplomacy, which are all interlinked under
113
the situation where the perspectives and mind-sets of the major actors and
relevant ministries differ. Regarding pharmaceuticals, for example, there
are various steps before they are widely used as medicines or vaccines,
including basic research, verification of safety and efficacy, approval
through legal procedures, protection of intellectual property rights,
business planning and pricing to meet market demand, and production
and sales.
Accordingly, Japan decided to strengthen its coordination function in the

government. To have a more organised ecosystem, Medical Excellence
JAPAN (MEJ) was established in 2011 as a general incorporated association
and hub platform to promote cooperation with foreign countries through
connecting the Japanese ecosystem with overseas ecosystems.
Subsequently, the government approved the Basic Principles of the Asia
Health and Wellbeing Initiative in 2016 (revised in 2018). Under this initiative,
the exchange of long-term care-related personnel and collaboration of
long-term care services with other countries have expanded, and MEJ is
currently serving as the secretariat.
Neither Japan nor ASEAN Member States have complete health care
ecosystems. What each country lacks, like-minded countries can fill in
the gaps; only when the ecosystems of like-minded countries are linked
together can a resilient ecosystem be created in a specific country and in
the region.
In the region where the perspectives, mind-sets, interests, and priorities of

major stakeholders are diverse, comprehensive coordination is essential
and a common challenge. One possible measure to alleviate these
bottlenecks is to create MEJ-like institutions or fora in each country. In the
future, when these fora collaborate mutually, health improvement and the
competitiveness of the Asian health care industry can improve. Against
this background, ERIA set up a special team for coordination, and full-
scale activities began in 2021 to realise mutually beneficial cooperation of
Asian countries through formulating an industry–government–academia–
medicine collaboration mechanism by referencing the MEJ model (Figure).
In response to these efforts, the MEV–MEJ Forum was established in Viet
Nam. In India, efforts are underway to establish Medical Excellence India.
Medical innovation can emerge in any country. No country can build and
maintain an adequate health care ecosystem in a closed form on its own. It
is necessary for technology, human resources, and experience to circulate
together and complement each other throughout the region.
114
Conceptual Diagram of Medical
Excellence Project
1 2
Medical
foresightful Harmonize Excellence Leverage idea innovative
between policy and innovation
solutions needs and
Japan
by private and bankable
for the next business needs sector solutions to
generation the market
industry-
government- private
academia sector
collaboration involvement
Medical Hub/ Medical Hub/
Platform Achieve UHC, Platform
Country A
Health and Country C
e.g.
Longevity in e.g.
Medical Excellence Medical Excellence
Country A
the region community
Country C
bilateral, building
regional and and human
international resource
cooperation pooling
resilient and 3
equalized
4 Medical Hub/
cooperative Platform and seamless
Launch
medical Upgrade
regional medical
Country B business medical
platform and
ecosystem for architecture to
accommodate
e.g.
conwnunity system
Medical Excellence
the region the new normal
Country B
network
throughout
the region
Source: Authors.
3.7. Sustainable Energy
3.7.1. Past ASEAN–Japan Energy Cooperation
Japan possesses high-quality energy technology, especially in the areas of power

transport systems, energy conservation, highly efficient fossil fuel-fired power
generation, and fossil fuel stockpiling, and has long supported the ASEAN region in
these fields. Japan’s support has been presented at meetings such as the ASEAN
Ministers on Energy Meeting Plus Three, which has been held annually since 2004,
and the East Asia Summit Energy Ministers Meeting, which has been held annually
since 2007. Human resources development; knowledge sharing; and research
cooperation on energy security, including oil stockpiling, high-efficiency coal-
fired power, and energy conservation have been ongoing. In addition to these
initiatives, recent trends have been marked by new initiatives related to renewable
energy; carbon dioxide capture, utilisation, and storage (CCUS); and hydrogen in
the transition to a low-carbon society.
In the field of energy conservation, ASEAN–Japan cooperation was initiated in

2000, with the implementation of the project for Promotion of Energy Efficiency
115
and Conservation (PROMEEC) and the Multi-Country Training Programme on
Energy Conservation for ASEAN Countries. In 2012, the PROMEEC project was
replaced by the ASEAN–Japan Energy Efficiency Partnership (AJEEP), which is
implemented by the ASEAN Centre for Energy and the Energy Conservation Center,
Japan in cooperation with the ASEAN Energy Efficiency and Conservation Sub-
Sector Network. Under the AJEEP, starting with consulting support on policies
and legal systems in AMS with advanced energy efficiency and conservation
promotion infrastructure (i.e. policies and legal systems), projects were formed to
help develop energy efficiency and conservation businesses. The AJEEP has also
contributed to human resources development to narrow country-specific gaps in
energy conservation infrastructure.
In the field of energy security, energy supply security planning for ASEAN was
initiated in conjunction with the ASEAN Senior Officials’ Meeting on Energy (SOME)–
Ministry of Economy, Trade and Industry of Japan (METI) cooperation programme
in 2000. The programme also aims to strengthen energy security through the
development and improvement of policies related to the stable supply of energy,
especially oil, in AMS. After recognising the importance of energy supply security
through information exchange and seminars for energy policy experts from ASEAN
and Japan, Japan helped organise data and prepare an energy demand outlook
(ACE, 2011), which are key elements in assessing energy security in the recent.
3.7.2. Recent World Energy Situation
Currently, the discussion on climate change is becoming more active around the
world. All countries, including AMS, that participated in the 2021 United Nations
Climate Change Conference in Glasgow, United Kingdom announced their
carbon-neutral scenarios to 2050 or 2060. In addition, the World Bank and various
European financial institutions have announced that they will take tougher stances
on financing fossil fuels. The Asian Development Bank (2021) also announced that
it will not support coal mining, processing, storage, and transport nor new coal-
fired power generation as a new policy of lending to the energy sector in 2021. Its
energy policy also states that there will be no support for natural gas exploration
and mining and only limited support for midstream and downstream natural
gas that meets conditions such as cost, decarbonisation, and operation period
guidelines.
The Russian invasion of Ukraine has further exacerbated imbalances of global fossil
fuel demand and supply, stoking inflationary pressures and slowing pandemic
recovery. The immediate reduction of the oil supply due to the collective efforts
of Western-led sanctions on Russia has recast the global energy trade and made
the oil market vulnerable, putting pressure on global fossil fuel supply security.
This is causing an increase in overall energy costs and deepening energy security
concerns around the world.
116
3.7.3. Energy Situation in ASEAN
ASEAN’s primary energy supply in 2060 is estimated to substantially increase to

about 3.3 times the 2017 level (Kimura et al., 2022). In addition, fossil fuels such as
coal, natural gas, and oil will continue to increase in 2060, and their share in the
energy mix in 2060 is expected to be more than 80% (Figure 3.3).
Figure 3.3: Primary Energy Supply in ASEAN
Mtoe
2500
Ammonia
2000 Hydrogen
Biomass
1500 Wind
Solar
1000 Geothermal
Hydro
500
Oil
Natural gas
0
Coal
2017
2030
2040
2050
2060
Nuclear
Baseline
Mtoe = million tonnes of oil equivalent.

Source: Kimura et al. (2022).
117
Renewable energy development in the ASEAN region is currently on pace, but these
figures reveal that the potential of these renewable energies differs from region to
region, and this tendency is particularly pronounced for wind power generation.
Therefore, the areas where renewable energy can be introduced at a low cost
are few, and fossil fuels remain an important source of electricity. This renewable
energy situation differs from that of Europe, where renewable energy resources
are abundant, especially wind. In addition, the ASEAN region has distinctive energy
landscapes compared to North America and Europe in terms of stage of economic
development, current energy mix, resources endowments, and cross-country
interconnection.
Figure 3.4: Solar Resource Potential across ASEAN
Source: Lee et al. (2020).
118
Figure 3.5: Wind Resource Potential across ASEAN
m/s = metre per second.

Source: Lee et al. (2020).
3.7.4. Ongoing and Future ASEAN–Japan Energy Cooperation
Future ASEAN–Japan energy cooperation will occur in the areas of carbon neutrality,
energy security, and human resources development. Japan has provided support
for these efforts in the past.
Regarding carbon neutrality, METI (2020) stated that energy cooperation with AMS
will become increasingly important. METI announced the Asia Energy Transition
Initiative (AETI) in 2019, which is a comprehensive support measure for the energy
transition in Asia. The AETI consists of the following five foundations:
(i) support for formulating energy transition road maps towards
implementing carbon neutrality;
(ii) presentation and promotion of the Asian version of energy transition
finance;
(iii) $10 billion in financing support for renewable energy, energy efficiency,
LNG, and other projects;
(iv) support for the development and deployment of technology, utilising a
¥2 trillion fund; and
(v) human resources development, knowledge sharing, and rules-making
on decarbonisation technologies.
119
Based on the AETI, ERIA has conducted studies on energy transition scenarios
and transition technologies in the ASEAN region, emphasising the importance
of a diversity of mitigation pathways towards carbon neutrality, including highly
efficient combined-cycle gas turbine, coal and ammonia co-combustion, gas and
hydrogen co-combustion, coal and biomass co-combustion in power generation
with the possibility of CCUS, and financing for related technologies (Kimura et al.,
2022; Han, 2022).
In line with the AETI, Japan also aims to realise the Asia Zero Emission Community
(AZEC) with like-minded Asian countries. The AZEC consists of four frameworks:
zero-emissions technology development, international joint investment and co-
financing towards this goal, standardisation of technologies, and a carbon credit
market. Strengthening energy security to support zero emissions in Asia will also
be promoted. The AZEC intends to help build decarbonised supply chains, such
as hydrogen and ammonia, as well as technology development and deployment,
with the support of and through coordination amongst relevant parties.
Although the AETI and AZEC are comprehensive, well-designed frameworks of
ASEAN-Japan energy cooperation, many details remain unresolved. The following
recommendations are designed to help create a more specific action plan to
achieve the goals of both frameworks.
First, technology development, demonstration, and supply chain development

must be actively promoted. As stated previously, based on the AETI, Kimura et
al. (2022) conducted a study on energy transition scenarios and stated that
achieving carbon neutrality in ASEAN will require a combination of various low-
carbon technologies in addition to renewable energy installations. However, many
of these technologies are currently too expensive for most AMS. Therefore, the key is
not to pursue any particular technology but to identify cost-effective technologies.
Japan therefore must actively develop and demonstrate these technologies and
then provide them to ASEAN. Furthermore, ASEAN and Japan should promote the
development of supply chains towards this objective.
Second, appropriate financial support for energy transition technologies is key.

As the European Union and Singapore are focussed on green technology, some
of the phased transition technologies needed in ASEAN – such as ammonia co-
firing – have not been financially supported. Therefore, it is necessary to establish
a common taxonomy for the ASEAN region to ensure that the technologies needed
for its energy transition are appropriately funded. As part of the AETI, the Asia
Transition Finance Study Group published the first version of such taxonomy in
2022, and ERIA published the first version of the transition technical list in 2022.
Facilitation of such transition financing should continue by updating these
documents and expanding stakeholder relationships into the future.
Third, support and cooperation are needed for the effective use of energy
resources. Specifically, these include improvements in energy efficiency and
120
energy connectivity. Cooperation between Japan and ASEAN in these areas has
taken place, but it is becoming even more important as energy security has
become a top priority for most countries – including AMS – due to unstable energy
prices. Improvements in energy efficiency and energy connectivity also are helpful
in achieving carbon neutrality affordably.
Indeed, energy efficiency has great potential in ASEAN, especially in the industrial,
transport, and building sectors. However, there are few managers and experts
capable of forming and managing such projects. Therefore, for energy efficiency
knowledge and skills to spread widely throughout the ASEAN region, it is important
to support capacity building continuously, as is occurring through the AJEEP.
In terms of enhancing energy connectivity, regional cooperation contributes

to more efficient deployment of low-carbon technologies, including renewable
energy. The ASEAN Power Grid initiative is seeking to optimise investments on a
regional scale rather than individually in each AMS, help balance excess supply
and demand, reduce the costs of developing energy infrastructure, and accelerate
development of renewable power generation into the regional grid. This initiative
is first occurring on cross-border bilateral terms, then expanded sub-regionally,
and finally to a totally integrated regional system.
ASEAN successfully launched sub-regional power trade in the Lao PDR-Thailand-

Malaysia-Singapore Power Integration Project, the first pilot project for multilateral
power trade in ASEAN. The knowledge gained, such as wheeling methodology and
development processes, can be used in the ASEAN Power Grid and further stimulate
discussions. However, the ASEAN Power Grid has issues that more complex than
those in the above project, such as consensus building amongst stakeholders,
establishment of a power-trading institution, market design, and infrastructure
development. ASEAN must be sure to engage in steady discussions from a long-
term perspective while involving countries with knowledge in these fields, such as
Japan, those in Europe, and the United States.
It must also be noted that Japan will benefit greatly from the ASEAN Power Grid.
The efficient supply of renewable energy will enable many Japanese companies
in ASEAN to conduct their business activities using green energy. This will improve
their social reliability and brands. In addition, the ability to connect large amounts
of renewable energy to the grid will create more opportunities for Japanese
companies to penetrate ASEAN as a power producer.
Lastly, human resources development for associated policy design and

implementation is essential. The pace of low-carbon technology diffusion is
strongly influenced by the ability of individuals and institutions to make informed
and effective decisions. Yet in many AMS, the institutional capacities of energy,
environment, and economic ministries remain weak; some do not have even basic
statistical data. Japan has focussed on developing human resources in ASEAN
121
capable of developing energy outlooks as the bases for policy design in past
projects. However, continuous support to increase the number of people who can
update energy outlooks and formulate policies, including manage basic statistical
data, is crucial.
3.8. Lessons and Areas for Cooperation to Support Sustainable

Tourism in ASEAN
3.8.1. Introduction
The vision for ASEAN tourism, as articulated in the ASEAN Economic Community
Blueprint 2025, is to make the region a quality tourism destination, which offers
a unique and diverse experience and is committed to sustainable tourism
development (ASEAN Secretariat, 2015a). In realising this vision, the ASEAN
Tourism Strategic Plan, 2016–2025 details two strategic directions: (i) enhance
the competitiveness of ASEAN as a single tourism destination, and (ii) ensure that
ASEAN tourism is sustainable and inclusive (ASEAN Secretariat, 2015b). Sustainable
and inclusive tourism is to be promoted through upgrading communities and
private sector participation in the tourism value chain; ensuring the safety, security,
and protection of tourism and heritage assets; and increasing responsiveness to
the environment and climate change.
Following the mid-term review of the plan in 2020, an updated plan was released
in January 2021, which recognises the need to encourage more programmes
and activities that promote sustainable and responsible tourism development
in ASEAN to balance the previous focus on marketing and promotional efforts.
Furthermore, the Phnom Penh Declaration on More Sustainable, Inclusive and
Resilient ASEAN Tourism was adopted in February 2021, which called for closer
collaboration amongst AMS as well as with relevant international organisations
and tourism stakeholders; expeditious development of a post-COVID-19 recovery
plan for ASEAN tourism; promotion of opportunities, especially for micro and SMEs,
vulnerable groups, and other affected communities; and enhanced capacity
building towards these goals (ASEAN, 2021c).
In addition, the COVID-19 pandemic required ASEAN to revisit its tourism strategy
as it prepared for the recovery and long-term resilience of the region. While
offsetting the devastating impacts of the pandemic on the tourism sector, the
pandemic should also serve as an impetus for the sector to ‘build back better’ by
designing a more sustainable tourism sector that underpins its resilience.
Recognising the important role of sustainability in the recovery of the tourism

sector, the ASEAN Framework on Sustainable Tourism Development in the Post-
COVID 19 Era was developed by ERIA and endorsed by ASEAN tourism ministers in
February 2023 (ASEAN, 2023). The framework provides a multi-sector approach
to sustainable tourism development by leveraging the work that is already being
122
undertaken by relevant sectors in the ASEAN community that have direct relevance
to and impact on the pursuit of sustainable tourism development in the region
(Figure 3.6).
Figure 3.6: ASEAN Framework on Sustainable Tourism Development in the Post-

COVID 19 Era
Vision
+
Strategic Goals
+
Guiding Principles
Visitor
Economic
industry Tourism
Growth/ Sustainability Environmental
Community Development
Socio Cultural
Environment
es Pi
gi l
la
te
rs
I. Sustainable II. Social

ra
economic inclusiveness,
/S
/ St
growth employment,
tra
and poverty
Pillars
reduction
teg
Sustainable
ie s
Tourism
V. Mutual Development III. Resource,
understanding efficiency,
and peace;
environmental
health, safety,
protection,
and security
and climate
change
IV. Cultural
values,
diversity,
Pi
and heritage
la
l
rs
/S
tra
ie s teg
Institutional Dimension: Local - National - Regional

(Governance, Monitoring, Technology)
Source: ASEAN (2023).
123
Going forward, developing an action plan on how sustainable tourism can be
more explicitly incorporated in their agendas – and how the tourism sectors
can incorporate related initiatives into their sustainable agendas – needs to be
analysed and explicated, together with identifying appropriate modalities for
cooperation, coordination, and/or collaboration. Doing so requires comprehensive
planning and adequate resources for effective development and implementation.
The support of ASEAN’s dialogue partners, including Japan, is essential in this
endeavour.
3.8.2. ASEAN–Japan Cooperation in Tourism and Sustainable Tourism
Japan supports ASEAN tourism primarily through the ASEAN Promotion Centre on
Trade, Investment and Tourism – also known as the ASEAN-Japan Centre – an
intergovernmental organisation established by AMS and Japan in 1981 in Tokyo,
through the conduct of seminars, workshops, capacity-building programmes,
research and policy analysis, cross-cultural events, and publication and information
dissemination services. Over the years, the ASEAN-Japan Centre has promoted
ASEAN tourism through the production and dissemination of promotional videos
and other materials; youth and other cultural exchanges; and provision of training
and other technical assistance to enhance ASEAN tourism stakeholders’ capacity
to better cater to Japanese tourists, promote ASEAN tourism to the Japanese
market, and strengthen product development. The ASEAN-Japan Centre also
promotes investment in the ASEAN tourism sector through investment seminars.
The nature of the assistance provided by Japan to ASEAN tourism is largely

determined under the ASEAN Tourism Strategic Plan, 2016–2025, which identified
ASEAN-Japan cooperation under Strategic Direction 1 through diversification of
tourism products; raising capacity and capability of human capital; implementation
and expansion of connectivity and destination infrastructure, particularly the air
services agreement and the ASEAN–Japan Cruise Promotion Strategy; and digital
tourism.
There is no explicit role for ASEAN–Japan cooperation under Strategic Direction

2, which includes priority initiatives related to upgrading local communities and
public–private sector participation in the tourism value chain, ensuring safety and
security, prioritising protection and management of heritage sites, and increasing
responsiveness to environmental protection and climate change. However, Japan
has indeed provided support for sustainable tourism in ASEAN. In particular, some
key Japanese initiatives for other sectors impact sustainable and inclusive tourism
in ASEAN, such as initiatives related to connectivity; smart cities; energy; resilient
and sustainable agriculture and food systems; the environment; climate change;
people-to-people, sports, and cultural exchanges; protection of heritage sites;
and peace and security.
The Meeting of ASEAN Plus Three Tourism Ministers (M-ATM+3) also serves as a
platform for Japan’s support of tourism and sustainable tourism in ASEAN. Main
124
areas of collaboration to promote quality tourism over the years have included
cruise tourism, cultural and eco-tourism, youth exchanges, human resources
development, joint tourism marketing and promotion, quality assurance, safety
measures for tourists, tourism crisis communications, and tourism statistics. In
2017 – which the United Nations General Assembly declared the International
Year of Sustainable Tourism for Development – the 16th M-ATM+3 called for the
promotion of sustainable tourism cooperation in the region. The 19th M-ATM+3,
held in January 2020, endorsed environmental management standards and
encouraged all ASEAN+3 countries to use these as their guidelines in implementing
more sustainable tourism. Most recently, the 22nd M-ATM+3, held in February 2023,
encouraged ASEAN+3 national tourism organisations to focus on capacity building,
sustainable tourism, digital transformation, tourism marketing, strengthening the
role of micro and SMEs, and identifying new initiatives to be implemented.
3.8.3. Some Lessons and Potential Areas for Cooperation with ASEAN
In terms of tourism policy in Japan, the focus during the 1970s and 1980s was
primarily to support and to develop domestic and outbound tourism. The focus
on national tourism and natural conservation aimed to encourage local and
regional economic development and revitalisation. Outbound tourism aimed to
support the economies of destination countries as well as to enhance the mutual
understanding between nations, which has been an important aspect of Japan’s
tourism policy. The focus of its tourism policy shifted in 1997 towards increasing
inbound tourism to both enhance international relations (i.e. encouraging more
people to visit Japan to promote understanding of the country and people) and
to stimulate economic growth, particularly in regional economies and industries
challenged by an ageing and decreasing population, urbanisation, and rural
decline. Thus, an initial goal was set in 2003 of increasing international arrivals to
10 million by 2010; this rose to a target set in 2012 of 25 million international arrivals
by 2020, and later to increased targets of an ambitious 40 million international
arrivals by 2020 and 60 million by 2030. While the domestic tourism market
remained bigger than the international market, remarkable growth has been
achieved, with the 10 million mark being exceeded in 2013, the 20 million mark in
2015, and the 30 million mark in in 2018 (Sharpley and Kato, 2021).
Not surprisingly, the rapid growth in and concentration of tourism in a few well-
known destinations in Japan also led to increased concern for and initiatives
related to the sustainability of tourism in recent years. Amongst the concerns were
overcrowding and pollution at the country's major attractions and the resulting
burden on residents and communities. The COVID-19 pandemic likewise called for
a reassessment of Japan’s policies and targets for international tourism, such as
a move towards alternative qualitative growth-based or even non-growth-based
tourism policies that would address the wider socioeconomic challenges faced
by the country.
125
The concept and practice of sustainability have deep roots in Japanese culture.
A recent demonstration of this is the global attention received by some Japanese
football fans for cleaning up trash at the 2022 FIFA World Cup in Qatar. More
generally, concern for sustainability and environmental issues – and the welfare
of local communities – formed part of Japan’s historical tourism development
policy, and environment and development were not seen as mutually exclusive.
Rather, the view was that reinforcing efforts for environmental protection by
the tourism industry and tourist destinations would increase the attraction of
tourist destinations, thereby contributing to their sustainable development and
the creation of tourist destinations that are nice to live in and visit. While more
recent policies focus on transforming Japan into a ‘tourism nation’ (MLIT, 2012:2) to
support national economic growth and regional revitalisation through increasing
international arrivals (MLIT, 2016), the goals of enhancing local community well-
being and international understanding continue to be highlighted (Sharpley and
Telfer, 2015; Sharpley and Kato, 2021). The need to build cooperative arrangements
involving various stakeholders in Japan’s tourism sector, including local public
bodies, residents, and the tourism industry, is also recognised to ensure that
environmental protection forms the core of sustainable growth for the tourism
sector (Alduais, 2009).
In 2022, Japan ranked 19 out of 163 countries in terms of achievement of the

SDGs, with an average achievement score of 79.6%.3 Remaining challenges were
identified in the areas of gender equality, responsible consumption and production,
climate action, life below water, life on land, and partnerships, although moderate
improvements were also noted in some of these areas. While not yet perfect, there
are some lessons to be learned from Japan’s pursuit of sustainable development
in general – and sustainable tourism in particular – that could be useful for
ASEAN and provide inputs in developing additional areas for tourism cooperation
between ASEAN and Japan.
Some key lessons from Japan’s pursuit of sustainable tourism are discussed
below, together with a brief discussion of how they relate to the ASEAN framework’s
pillars and strategic areas for intervention and the potential role of ASEAN–Japan
cooperation to support those areas.
3.8.3.1. Promote and Manage Tourism as a Tool for Regional or Local Development
and Revitalisation
Historically, Japan has promoted domestic tourism coupled with natural

conservation as a means of promoting local and regional development and
revitalisation, which was facilitated by the development of transport infrastructure,
particularly extensive road and rail networks. More recent policies to promote
inbound tourism aim to utilise the country’s abundant natural and cultural
3
Sustainable Development Report, Sustainable Development Report 2022, https://dashboards.sdgindex.org/
126
resources, such as spiritual sites, spas, traditional lifestyles and cuisines, arts,
crafts, and skills deeply rooted in the environment and traditions that hold natural
sustainability as their core.
In an extensive review of the literature on Japanese tourism, Horita and Kato (2018)
noted that two key terms are typically used. Kankō refers to the specific role of
tourism in region/local destination development. Machizukuri, which is one of the
most prominent concepts in the Japanese approach to tourism as community and
regional development or revitalisation, may be defined as sustainable community
development, with a focus on social capital, community unity, and resilience based
on regional knowledge, wisdom, and sense of place. Such community-based and
people-focussed tourism needs to be more strongly highlighted in ASEAN as a
means of achieving sustainable economic growth, especially at the local level
and in rural areas, as well as promoting and protecting the environment and
cultural heritage.
3.8.3.2. Engage Local Communities
Local communities have been actively engaged in the development and use
of spaces for tourism and leisure in Japan. Oura (2018) examined the historical
development of national forest management and policy and its relationship to
tourism policy in Japan, noting that transformations in national forest administration
policy since the 1990s have brought about collaborative forest management under
the new concept of ‘forests for people’. She concluded that wider implementation
of such initiatives, including public participation in management, is needed to
promote the further development of forest tourism in Japan.
Horita (2018) highlighted the engagement of local communities in the development

and use of urban spaces for tourism and leisure in larger metropolises and small
and medium cities in Japan. However, tensions remain between a development-
oriented focus based on economic growth and collaborative management based
on valuing the locality with the prospect of active citizen participation in local
management. The ASEAN framework also calls for greater focus on people’s
engagement and empowerment in the pursuit of sustainable tourism development.
3.8.3.3. Tourism and Natural Catastrophes
Many AMS are prone to natural catastrophes, as is Japan. The importance of

tourism development in the early stages of a recovery process following a natural
disaster is highlighted by Kato (2018) in the context of the 2011 Tōhoku earthquake
and tsunami, particularly by helping communities maintain their connection to
their place. In particular, tourism that built on traditional ecological knowledge
helped affected communities maintain their connection with the land, which is
argued to be the core of resilience.
127
The COVID-19 pandemic devastated local economies and rural communities in
Japan that are reliant on inbound tourism. The immediate challenge facing them
is the opposite of overtourism, as local customers are not enough to sustain their
operations. While the effects of the pandemic linger, it is an opportune time for
rural destinations to consider developing more sustainable forms of tourism.
Another important aspect is the vulnerability of international visitors and tourists.

Looking at how national and local governments – as well as the tourism industry
– in Japan have helped reduce international visitors’ vulnerability to disasters
such as earthquakes, tsunamis, typhoons, and floods is instructive. In particular,
the role of digital technologies, such as mobile safety apps and social media,
to disseminate up-to-date and accurate multi-lingual information needs to
be highlighted. The ASEAN framework assigns a critical enabling role to digital
technologies to promote sustainable tourism development.
3.8.3.4. Measuring Sustainable Tourism
Establishing necessary governance structures and generating the relevant

information to support the design of appropriate tourism policies have been
crucial in Japan. The need to build cooperative arrangements involving the various
stakeholders in Japan’s tourism sector, including local public bodies, residents,
and the tourism industry, ensured that environmental protection formed the core
of sustainable growth for the tourism sector. Increasing the numbers of destination
management organisations have also created more effective management
and promotion of regional tourism. In December 2007, the Ministry of Land,
Infrastructure, Transport and Tourism (MLIT) conducted a survey of awareness on
tourism and the environment, which targeted travel agents, hoteliers, and event
organisers, to determine (i) the status of efforts for environmental protection, (ii)
effects of efforts for environmental protection, (iii) problems related to efforts
for environmental protection, and (iv) the support and systems sought to tackle
environmental protection (MLIT, 2008).
The Japan Tourism Agency (JTA) was set up in 2008 under MLIT to enhance
tourism-related measures to achieve the goal of transforming Japan into a tourism
nation. In June 2018, JTA established the Sustainable Tourism Promotion Office as
well as conducted a national survey amongst Japan’s 1,765 local governments
to benchmark the state of sustainability nationally, focussing on key elements
including transport, accommodations, and infrastructure. Following the results
of the survey, developing a set of internationally recognised sustainable tourism
indicators to serve as national guidelines and facilitating local implementation
were deemed necessary (JTA, 2019).
JTA then joined the Global Sustainable Tourism Council (GSTC) in 2019, expressing
its commitment to adopt GSTC criteria as part of its tourism policy for destination
management. A national set of guidelines, Japan Sustainable Tourism Standard
128
for Destinations (JSTS-D), which was based on the global GSTC standards adapted
to the Japanese context, was issued (JTA, 2019). The JSTS-D is the criteria by
which industry operators in Japan can seek certification as being sustainable to
an international standard. The JSTS-D was developed by a committee composed
of representatives from academia, World Tourism Organization, Japan National
Tourism Office, JICA, Japan Association of Travel Agents, local governments, and
JTA. JTA has selected 5 areas in 2020 and 15 areas in 2021 as model areas for the
introduction of sustainable tourism destination management using the JSTS-D.
Establishing appropriate governance structures and monitoring mechanisms to
support sustainable tourism development is a challenge in most AMS. The ASEAN
framework recognises that partnerships formed amongst intergovernmental
departments, tourism businesses, civil society, local communities, tourists,
international organisations, and other stakeholders are the building blocks for
harnessing the full potential of sustainable tourism development. Timely, accurate,
and comprehensive data to measure and to monitor tourism performance, impact,
and sustainability is also critical. This area needs to be prioritised and will require
significant resources, time, and expertise. The Japanese experience in developing
and implementing its version of the GSTC criteria may yield helpful insights on
whether and how AMS can adapt the criteria to their particular contexts.
3.8.4. Conclusion
The preceding discussion cites some key lessons that ASEAN may glean from
Japan’s sustainable tourism development, which may be further developed as
areas of cooperation. There are also lessons that relate to sustainable tourism in
other areas such as Japan’s pursuit of a decarbonised society, community building
in an era of climate change, cultural heritage and sustainable tourism, integrated
innovation strategies, and unlocking SME potential for sustainability. The support
of Japan in promoting ASEAN tourism to the Japanese market, providing training
and other technical assistance to enhance ASEAN tourism stakeholders’ capacity
to better cater to Japanese tourists and to strengthen product development,
and promoting investment in the ASEAN tourism sector will continue to be vital.
A stronger focus, however, is needed on the sustainability aspects of the tourism
industry and sustainably minded tourists.
129
3.9. The Circular Economy
The following policy recommendations are proposed to help develop a circular

economy in the ASEAN–Japan context.
Recognise that the circular economy has become an important factor in the
growth of the overall economy by capturing changes in society. ASEAN adopted
the Framework for Circular Economy for the ASEAN Economic Community in
2021 (ASEAN, 2021a). The framework identifies three strategic goals, six guiding
principles, and five strategic priorities. Although Japan has used a sound material
cycle society instead of a circular economy, it has conducted various policies
towards a circular economy, such as a waste source separation programme by
local governments; establishment of recycling industrial parks; development of
standards for goods made from recycled materials; and development of various
recycling laws on packaging containers, large home appliances, small electronic
waste, vehicles, food waste, and construction waste. In the process of developing
and implementing these acts, the Ministry of the Environment (MOE), METI, and
other ministries work together to enforce these circular economy regulations.
Support policies to promote investment in physical infrastructure related to

the circular economy. In ASEAN, where green urbanisation is not progressing,
infrastructure for waste collection and recycling – such as volume reduction
technologies for transport – is lacking. Most of the recycling industry is located
near large cities, where it can secure recyclable waste for the recycling process.
In areas far from recyclers or where transport costs are high, recyclable waste is
not collected.
In Japan, METI collaborated with local governments to start the eco-town

programme in 1997. Local governments thus secured areas for the recycling
industry. In addition, companies located in recycling industrial parks where able
to lower transport costs. For example, companies dismantling e-waste send steel
scraps to metal recyclers, plastic waste to plastic recyclers, and non-recyclable
waste to waste energy plants.
In Japan's experience, in addition to the investment by recyclers, efforts by existing
industries – such as steel, nonferrous metals, and chemicals – have been key, as
they can accept various waste for some chemical processes. It is also important
to invest in infrastructure for transport through official development assistance
(ODA). In addition, the government must also prevent a monopoly or oligopoly
of the shipping industry, because these increase the transport cost of recyclable
waste.
Develop support for the circular economy. Market-based recycling based on

incentives – such as those from Bank Sampah in Indonesia and Wongpanit, a
junk shop chain in Thailand – have potential in ASEAN. Both advertise payments
for various recyclable waste to encourage people to bring it to the bank or to
130
the shop. Such a collection mechanism works if recyclable waste is valuable.
Institutional support or regulatory guidance for waste in each country that
promotes such incentives is needed. Introducing extended producer responsibility
is an option when the market-based collection system is ineffective. Moreover,
some recycled products may not satisfy conventional industrial standards. It is
therefore important to introduce industrial standards for recycled products. Such
standards can be utilised in government initiatives for green procurement.
Support people related to the circular economy. During the period of high economic
growth in Japan during the 1950s and 1960s, the waste collection system was very
limited, and people’s motivations were also low. A turning point in changing this
behaviour was the Tokyo Olympic Games in 1964. Before the Olympics, the Tokyo
metropolitan government removed communal waste bins from the streets and
asked citizens to put their own plastic waste bins out for garbage trucks to pick up
the waste.
3.10 ASEAN–Japan Cooperation on Human Capital Development
3.10.1 Rationale for Cooperation
ASEAN–Japan cooperation on human capital development can enhance deep

economic cooperation. Japan is an important player in the ASEAN economy. Indeed,
Japan’s share of total inward FDI flow to ASEAN was around 12% during 2015–2021.4
Over one-third of Japanese investment in ASEAN went to manufacturing, followed
by financial and insurance activities (25%), and wholesale and retail trade (11%).
Over 70% of Japanese inflow into ASEAN went to sectors where technological
disruption is likely to be the greatest in the form of automation, blockchain and
digital finance, and e-commerce. As a result, the human capital needs of these
sectors will increase, with greater demand for digital skills and the ability to perform
non-routine and cognitive tasks. Thus, the level of skills of ASEAN workforce will
determine the productivity of Japanese investments in the region.
However, many AMS lack such a skilled workforce. One summary of the level of
human capital is provided by the World Bank Human Capital Index (World Bank,
2020). According to this index, compared to Japan’s Human Capital Index (HCI)
of 0.80, AMS had an average HCI of 0.59 (Figure 3.7). Only Singapore, with an HCI
of 0.88, exceeded that of Japan. This lack of a skilled workforce has indeed been
felt by Japanese companies in the region. A survey of Japanese affiliates by the
Japan External Trade Organization reported a shortage of digital-related human
resources as a barrier to the utilisation of digital technologies (JETRO, 2021).
4
ASEAN, ASEANStats Data Portal, https://data.aseanstats.org/fdi-by-hosts-and-sources (accessed 30 November
2022).
131
Figure 3.7: Human Capital Index in ASEAN Member States
1
0.9
Japan = 0.80
0.8
0.7
0.6
ASEAN avg = 0.59
0.5
0.4
0.3
0.2
0.1
0
e
ei
nd
es
ar
R
PD
or
si
si
di
un
Na
nm
in
la
ay
ne
bo
ap
pp
Br
o
ai
et
al
do
ya
La
am
ng
Th
ili
M
Vi
M
In
Ph
Si
ASEAN = Association of Southeast Asian Nations, Lao PDR = Lao People’s Democratic Republic.
Source: World Bank, Human Capital Index, Data, https://data.worldbank.org/indicator/HD.HCI.OVRL (accessed 30
November 2022).
A deeper partnership between ASEAN and Japan in human capital development

is necessary for a long-term economic partnership. Despite the current shortage
of skills, ASEAN will continue to be an important economic partner for Japan due
its natural resources, deep economic integration, and relatively young population.
Japan’s working-age population is expected to shrink by 28% by 2050, while that of
ASEAN will increase by 13% (Table 3.6). A skilled workforce in ASEAN can support the
Japanese economy through labour migration in the future. By working together to
upgrade ASEAN’s human capital, ASEAN and Japan can continue to foster mutually
beneficial economic partnership for years to come.
132
Table 3.6: Working-Age Population (ages 15–65 years), ASEAN Member States
Country 2020 2050 Projected

(projected) Change
(%)
Indonesia 185.0 214.0 15.7
Philippines 71.0 96.0 35.2
Viet Nam 67.0 68.0 1.5
Japan 75.0 54.0 (28.0)
Myanmar 37.0 42.0 13.5
Thailand 49.0 38.0 (22.4)
Malaysia 22.0 27.0 22.7
Cambodia 11.0 14.0 27.3
Lao PDR 5.0 7.0 40.0
Singapore 4.0 4.0 0.0
Brunei Darussalam 0.3 0.3 0.0
ASEAN total 451.0 510.0 13.1
() = negative, ASEAN = Association of Southeast Asian Nations, Lao PDR = Lao People’s Democratic Republic.
Source: Lemahieu and Leng (2021).
Japan has a strong record of human capital development and thus much to
offer ASEAN. Miyazawa (2011) concluded that the increase in human capital could
explain much of Japan’s economic growth during the 1950s and 1960s. At present,
Japan has a strong ecosystem for producing a skilled workforce, with universal
basic education, a high tertiary completion rate, and a high level of government
spending on education. In 2019, Japan spent 4% of its GDP on primary to tertiary
educational institutions. The level of tertiary attainment amongst 25–34-year-
olds was 65% in 2021, one of the highest amongst Organisation for Economic Co-
operation and Development (OECD) and partner countries with available data.
133
Five of its universities rank amongst the top 100 global universities.5Amongst
universities in ASEAN, two universities in Singapore rank within top 20, and one from
Malaysia ranks within top 70. Through systematic cooperation, Japan’s experience
in human capital development can support rapid upgrading of skills development
systems in ASEAN.
3.10.2. Types of Cooperation
ASEAN–Japan cooperation on human capital development could take both

financial and non-financial forms. On the financial side, Japan can set up
dedicated funds to support human capital development in ASEAN through loans
and grants focussed on infrastructure development – most importantly on the
digital capabilities of educational institutions – and incentive programmes for skills
development. Financing to upgrade the digital capability of education institutions
in ASEAN can be another key priority area. With a relatively young population, the
demand for quality education in ASEAN is only going to rise.
Disruptions due to the COVID-19 pandemic has made it necessary to come up with
new ways of providing quality education, requiring large investments by AMS. On
15 October 2020, ASEAN education ministers issued a statement that envisioned
collaboration with ASEAN partners for digital transformation of education systems
throughout ASEAN (ASEAN, 2020). ASEAN’s desire to improve its education sector
is also envisaged in the ASEAN Work Plan on Education 2020–2025 (ASEAN
Secretariat, 2020). Japan can be an important partner in fulfilling this goal by
financially supporting key activities.
Japan is already active in the ASEAN education sector through ODA (Table 3.7).
Most of Japan’s assistance is disbursed bilaterally, but disbursing support at the
ASEAN level would have the added benefit of supporting ASEAN’s integration efforts
and people-to-people connectivity.
5
QS Top Universities, QS World University Rankings 2023: Top Global Universities, https://www.topuniversities.com/
university-rankings/world-university-rankings/2023 (accessed 29 November 2022).
134
Table 3.7: Japan’s Official Development Assistance to Selected ASEAN Member
States, 2021
Recipient All Sectors Education Education

($ million) ($ million) Share (%)
Cambodia 470 18 3.9
Indonesia 1,033 30 3.0
Lao PDR 55 7 13.5
Malaysia 20 2 11.3
Philippines 1,175 4 0.3
Thailand 215 8 3.9
Viet Nam 440 28 6.3

Note: Data pertain to gross disbursements expressed in current prices.
Source: OECD, Creditor Reporting System (CRS), OECD.Stat, https://stats.oecd.org/Index.aspx?DataSetCode=crs1#
(accessed 21 March 2023).
ASEAN and Japan could also work together to foster greater private sector
investment in the education sector. According to ASEANStats data, net inward FDI in
education in ASEAN in 2019 totalled $306 million, out of which Japan’s contribution
was $15 million (5%).6 ASEAN and Japan could work together to further liberalise
the education sector to FDI and to attract investments from Japanese academic
institutions and training providers. Particularly in the technical and vocational
education and training sector and education technology sector, investment
from Japanese firms could help make them more responsive to the needs of the
industry. Some estimates suggest that there were 318 ed-tech start-ups in Japan.7
Non-financial cooperation between ASEAN and Japan can occur between

governmental agencies tasked with human resources development, between
skills development institutions in ASEAN and Japan, and businesses. Cooperation
6
ASEAN, ASEANStats Data Portal, https://data.aseanstats.org/fdi-by-hosts-and-sources (accessed 30 November
2022).
7
Tracxn, EdTech Startups in Japan, https://tracxn.com/explore/EdTech-Startups-in-Japan (accessed 30
November 2022).
135
can occur in various forms, such as memoranda of understanding, training and
capacity building, twinning and dual-degree programmes, and student exchanges.
ASEAN and Japan can also work to provide institutional support for private sector
cooperation. Training SMEs in ASEAN in Kaizen management practices could help
improve their productivity.
Labour migration is another way for ASEAN and Japan to cooperate. Research has
shown that immigration to high-wage, developed countries encourages human
capital investment in origin countries. ASEAN will benefit if highly skilled nationals
gather experience in developed countries and return to utilise those skills in their
native countries. Increasing opportunities for the migration of ASEAN workers to
Japan will not only help address the worker shortage in Japan but also improve
the human capital situation in ASEAN.
One concern with labour migration from developing countries is the drain of
human resources from the origin countries, which can hamper the origin country’s
development. One recommendation is to form a skills partnership between host
and origin countries (Clemons, 2015). Under such an agreement, the host country
funds training programmes in sending regions, training a larger number of workers
than the number of eventual migrants. Such an arrangement ensures that there is
adequate supply of skilled workers in both the host and origin countries.
136
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World Health Organization (WHO), Universal Health Coverage, Health Topics,
https://www.who.int/health-topics/universal-health-coverage#tab=tab_1
–––––(2017), ASEAN–Japan Research Initiative UHC and Ageing, News, 17 July, https://
extranet.who.int/kobe_centre/en/news/Leadership_Program_20170717
141
142
CHAPTER 4
Survey on International
Economic Cooperation

Economic Research Institute for ASEAN
and East Asia
4.1 Introduction
In this chapter, opportunities for the enhancement and expansion of the
partnership between the Association of Southeast Asian Nations (ASEAN) and
Japan are explored through the lens of various case studies from other regions of
the world. In collaboration with Deloitte Consulting Pte Ltd., the chapter examines
case studies on four key domains of interest:
(i) Trading across borders. ASEAN has built a competitive and resilient
international production network, thanks to its generally liberalised trade
environment. The COVID-19 pandemic exposed the vulnerabilities of the
trading system, however, including supply chain resilience. In this chapter,
boosting multilateral trade and customs clearance operations are thus
investigated.
(ii) Human resources development. Industry 4.0 is requiring new skill sets for
human resources, including those in the ASEAN–Japan region. This chapter
investigates approaches to the development and supply of such human
resources to the labour market across the globe.
(iii) Digital economy. Digital technology is creating new, large businesses. In
addition, in this age of rapid digital penetration, digital innovation is a key
driver of economic growth. How innovation can be promoted in the ASEAN–
Japan region is therefore investigated.
(iv) Sustainability. For ASEAN and Japan, sustainability is not a medium- to long-
term initiative but an urgent issue. Climate change and disasters are having
major impacts in the region. The chapter examines various sustainability
agendas around the world that ASEAN and Japan should consider.
143
4.2. Trading across Borders
This section examines case studies concerning the digitisation of trading practices.
Furthermore, it expounds on emergency trading schemes in the European Union
(EU) and Japan, which offer insights not only on emergency situations but also on
the establishment of an expeditious logistics network, with the aim of invigorating
business activities in specific industries.
4.2.1. Intra-Regional Integration of the Trading System
4.2.1.1. European Union Single Window Environment for Customs
In 2020, the European Commission (EC) launched a new customs union action
plan intended to enhance efficiency within the EU Customs Union.1This plan falls
under the EU Customs Single Window Certificates Exchange System.2It provides
customs officers, traders, and information technology service providers with a
streamlined and integrated platform to work together.
In compliance with EU directives, member states are required to establish electronic

windows for the centralised submission of customs-related documents. The plan
intends to integrate these national single windows (NSWs) into a single digitalisation
framework, thus enabling authorities in each member state to readily access
requisite customs information. This will replace the current decentralised system
of customs contact points with a centralised electronic contact point for each
member state, thereby standardising the implementation of customs clearance
procedures and reducing administrative burdens on operators. Ultimately, the EC
envisions the establishment and operation of a centralised contact point for the
entire EU region.
According to the EC, a gradual implementation process will extend 1 decade (i.e. to
2030). This extended duration is deemed necessary to accommodate legislative
proceedings and the creation of novel information technology systems at both
the EU and member state levels.
1
EC, The Customs Action Plan: Supporting EU Customs to Protect Revenues, Prosperity and Security, Taxation and
Customs Union, https://taxation-customs.ec.europa.eu/customs-action-plan-supporting-eu-customs-protect-
revenues-prosperity-and-security_en
2
EC, The EU Single Window Environment for Customs, Taxation and Customs Union, https://taxation-customs.
ec.europa.eu/eu-single-window-environment-customs_en
144
4.2.1.2. Common Market for Eastern and Southern Africa (COMESA)
In 2017, the Common Market for Eastern and Southern Africa (COMESA)3 was
established as a large economic and trading unit to effectively address the
challenges faced by its member states. A key priority is the need to enhance intra-
regional trade and the investment environment at the regional and member state
levels (COMESA, 2022). Accordingly, COMESA resolved to adopt a uniform data
connectivity platform via an electronic single window system, thereby streamlining
and enhancing the efficiency of trade-related procedures within the region.
From 18 to 21 July 2022, a technical working group formulated requirements

and a framework for the electronic single window system (COMESA, 2022). This
undertaking entailed a session with customs and single window experts drawn
from 15 member states. Several items were deliberated, including a situational
assessment study on the implementation of an electronic single window
system, a draft legal framework, and a draft strategy for the development and
implementation of electronic single windows. As of this writing, half of the member
states have implemented electronic single windows, with the remaining countries
at varying stages of planning or deploying them.
4.2.2. Private Trade Platforms
To enhance trade facilitation, the private sector has created platforms that offer
online services to expedite trade, harnessing the potential of digital technologies,
most notably blockchain. In 2020, a blockchain-based platform, TradeWaltz, was
established, aimed at facilitating trade information collaboration.4 It was a joint
investment venture by prominent entities such as Mitsubishi, Nippon Telegraph
and Telephone (NTT), and Toyota. In November 2020, TradeWaltz entered into
a memorandum of understanding with Nippon Automated Cargo and Port
Consolidated System (NACCS), Japan’s NSW system that processes imports and
exports and port-related information (TradeWaltz, 2020). This partnership between
Japan's NSW (i.e. NACCS) and a private-sector trading platform (i.e. TradeWaltz)
promotes digitalisation across trade operations; it has indeed boosted operational
efficiency, with a demonstrated increase of over 44% (TradeWaltz, 2021a).
TradeWaltz has also partnered with public systems in various ASEAN Member States
(AMS), as the digitisation of trade-related procedures necessitates collaboration
between public and private systems across international borders. To this end,
TradeWaltz is actively engaged in constructing the ASEAN–Japan Digital Trade
3
COMESA is a regional organisation of 21 member states (i.e. Burundi, Comoros, Democratic Republic of the
Congo, Djibouti, Egypt, Eritrea, Eswatini, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles,
Somalia, Sudan, Tunisia, Uganda, Zambia, and Zimbabwe).
4
TradeWaltz, https://www.tradewaltz.com/en/
145
Platform based on the Regional Digital Trade Connectivity initiative (NTT Data
Institute of Management Consulting, 2021). The preliminary group of countries
in the platform comprises Japan (i.e. TradeWaltz), Singapore (i.e. Networked
Trade Platform), and Thailand (i.e. National Digital Trade Platform), improving
international data interoperability and security through blockchain infrastructure.
In January 2022, TradeWaltz and the National Digital Trade Platform (Thailand)
signed terms of reference based on the International Platform Connection Plan
(TradeWaltz, 2022a).5 This collaboration is expected to facilitate the visualisation
of supply chains and to enhance the search for necessary items (e.g. relief
goods) while identifying alternative distribution routes during emergency events
(e.g. pandemics). The successful linkage is also expected to facilitate electronic
certificates of origin (COO) for firms to use a free trade agreement (FTA) or an
economic partnership agreement (EPA), thereby promoting cross-border trade.
This development is also expected to enhance the efficiency and ease of applying
for other FTAs or EPAs.
During the Trade DX Symposium in 2022, TradeWaltz announced the successful

establishment of connections between five trading platforms in Australia, New
Zealand, Japan, Singapore, and Thailand (TradeWaltz, 2022b). Furthermore,
TradeWaltz has demonstrated the ability to interface with an external location
information platform to enable real-time tracking of packages, potentially
enabling accurate lead times in transport and faster response to goods shortages
(TradeWaltz, 2021b).
There are several other private-sector trading platforms in the world. For
instance, Maersk Line – the largest global shipping company, which is based
in the Netherlands – collaborated with IBM in the United States (US) to develop
TradeLens, a digital open platform that also utilises blockchain technology. The
platform underwent demonstration tests in 2016 and has been introduced to some
AMS, including Singapore and Thailand (TradeLens, 2019).
5
This agreement, proposed by ASEAN and Asia-Pacific Economic Cooperation (APEC), was introduced during the
Asia–Japan Investing for the Future Initiative.
146
4.2.3. Import and Export Systems for Disaster Supplies
4.2.3.1. Single Market Emergency Instrument
In 1993, the EU implemented a single market system, thereby eliminating cross-

border barriers and enabling EU citizens to study, reside, work, and retire in any
EU member state with the same privileges that they would have in their home
countries (EC, 2022a).6 In the same vein, in 2022, the EC introduced the Single
Market Emergency Instrument (SMEI) as part of a crisis governance framework
designed to preserve the unhindered movement of goods, services, and people
across EU member states during times of emergency, including the recent
COVID-19 pandemic.7 Although the single market has demonstrated some
effectiveness in such situations, it became evident that the existing framework
required enhancement to support ad-hoc operations and a more standardised
system during emergencies.
The SMEI thus serves as a supplementary mechanism to other EU legislative

frameworks for crisis management, such as the Civil Protection Mechanism. A
novel feature is the identification of distinct levels of risk, with an appropriate
mode of response tailored to each level. Specifically, these levels are contingency,
vigilance, and emergency, with each level indicating a progressively greater risk
level. During the contingency mode, the EC and member states collaborate to
establish a coordination and communication network, intended to enhance
preparedness. Subsequently, in the vigilance mode, the EC and member states
shift their strategic focus towards supply chains, goods, and services that require
stocking up in anticipation of potential emergencies. The final stage – the
emergency mode – involves an advisory group making suggestions that are most
relevant to the specific situation at hand. As of November 2022, member states
are currently evaluating the SMEI to assess its adequacy as a supplementary
framework for future emergencies.
4.2.3.2. Japan
During the COVID-19 pandemic in Japan, customs duties and domestic consumption
taxes were waived for goods pertaining to countermeasures against COVID-19,
provided that such goods were donated.8 Similarly, in the aftermath of the 2011
Tōhoku earthquake and tsunami, the Customs and Tariff Bureau implemented
four major procedural changes related to relief goods, including the exemption
of tariffs and consumption taxes on relief goods as well as simplifying customs
declaration procedures for them. Procedures related to food and beverages
6
EC, Mutual Recognition Agreement, European Migration Network (EMN), https://home-affairs.ec.europa.eu/
pages/glossary/mutual-recognition-agreement_en
7
EC, Single Market, Priorities and Actions https://european-union.europa.eu/priorities-and-actions/actions-topic/
single-market_en
8
Government of Japan, Ministry of Finance, Customs and Tariff Bureau, Customs Clearance Procedures, etc.,
Relating to Countermeasures to the COVID-19, Japan Customs, https://www.customs.go.jp/english/news/
covid-19/index.htm
147
under the Food Sanitation Act, foreign vessels carrying aid, and the importation
of pharmaceutical aid supplies were streamlined to facilitate relief efforts (JETRO
Australia, 2011).
The EU is transitioning to a new phase of integrating NSWs within its region. In

the EU, customs clearance operations are partially standardised across member
states, and efforts are underway to establish paperless windows in each member
states to enhance operational efficiency. The EU aims to establish NSWs in all of
its member states and to connect them to a centralised platform, an initial step
towards the eventual creation of a single regional window. This effort parallels the
initiatives of the ASEAN Single Window, which has already implemented a single
window linking NSWs through a limited scope in the region. The digitalisation of
paper-based COO and bills of lading is also a priority for AMS, and their expeditious
implementation is expected.
TradeWaltz highlights the potential for other APEC or ASEAN nations to engage
in collaborative platforms that facilitate trade information dissemination. The
proliferation of private-sector trading windows and their multilateral linkages
– which hinge on linkages with NSWs – will help alleviate the challenges that
companies face in trade operations throughout the ASEAN region. By enhancing
connectivity between NSWs and private-sector trading platforms, the tracking
of components and customs clearance statuses will improve, helping facilitate
trade.
Although estimating lead times has been historically challenging, the improved
interconnectivity amongst trading platforms should enable firms to predict them
more easily. Furthermore, the application of Harmonized System (HS) codes, which
has been a manual process in some customs offices throughout the region, may
become more digitised as the system implementation advances. As the need for
human involvement decreases, face-to-face interactions required for facilitation
payments are also likely to lessen, boosting efficiency.
In the context of disaster relief supplies and services during emergencies, the
primary focus should be on streamlining the systems to ensure efficiency and
expediency in delivering the requisite goods and services to the affected areas.
As mentioned, the EU employs a unified market structure that facilitates the
reduction of administrative barriers concerning general privileges throughout the
region. The SMEI aims to complement existing systems to enhance emergency
response capabilities. Similarly, in Japan, the 2011 Tōhoku earthquake and tsunami
prompted revisions to importation procedures for essential disaster relief supplies
and services.
The development of emergency guidelines can have broad implications for the
supply of crucial goods between ASEAN and Japan. As both face the frequent
occurrence of disasters, they must grapple with devising effective strategies for
148
managing emergency relief supplies in the face of unforeseeable circumstances.
The formulation of such guidelines would help facilitate the timely delivery of
medical and daily necessities when critical.
4.3. Human Resources Development

The cultivation of skilled white-collar and middle-management professionals
capable of responding to the demands of Industry 4.0 is vital for sustaining the
economic growth of ASEAN and Japan. Achieving this goal entails identifying the
requisite skill sets in the new digital age to bridge the gap between existing skills
and those required by companies. Additionally, inclusive education initiatives
must be implemented to establish a diverse pool of human resources, ensuring
ongoing production and enhancing regional mobility. This section features case
studies that highlight efforts to define these skill sets, establish inclusive education
programmes, and improve human resources mobility.
4.3.1. Defining Regional Skills Standards

4.3.1.1. International Labour Organization
The International Labour Organization (ILO) created the Global Framework

on Core Skills for Life and Work in the 21st Century to guide today’s workers in
enhancing their capacity to capitalise on opportunities for decent work, as global
requirements for work continue to evolve (ILO, 2021). It is aligned with Sustainable
Development Goals 4 and 8, ILO Centenary Declaration on the Future of Work, Human
Resources Development Convention (1975), and Human Resources Development
Recommendation (1975). The framework was developed after a rigorous review of
core skills frameworks, a study on the impact of global drivers on the world of work,
and consultations with professionals from different sectors. It groups 19 core skills
into 4 categories – social and emotional skills, cognitive and metacognitive skills,
basic digital skills, and basic skills for green jobs. The four categories are designed
to enable the ease of transferability between occupations and low- and high-
level jobs; they deemed essential for individuals to become productive citizens
and to contribute to their own well-being and community.
Social and emotional skills encompass the ability to regulate one's cognition,
emotions, and behaviour, which are fundamental to effective social interaction
in the workplace and an individual's learning process (ILO and OECD, 2018). These
skills serve as a guide for the development and application of the next category –
cognitive and metacognitive skills – which refers to the brain's ability to process
novel information, and to comprehend, recall, and utilise it. These skills enable
individuals to identify the most appropriate strategies and problem-solving
methods for specific situations and become particularly evident when individuals
apply their own beliefs and values to evaluate the motivations and intentions of
those around them within their respective environments.
149
The fundamental digital skills category refers to an individual's aptitude to operate
digital assets – including hardware, software, and online applications – to carry
out basic tasks. These proficiencies aim to promote digital literacy amongst
individuals and to enable them to excel in their respective workplaces and society.
Lastly, basic skills for green jobs, which constitute the fourth category, encompass
proficiencies for individuals to acclimate to environmental regulations and
requirements to combat climate change.
Subsequent to a future survey administered amongst specialists and experts, two

pivotal products are necessary to facilitate the implementation of the framework.
These include a digital tool kit that enables the seamless integration of the policy
across diverse learning platforms and the creation of massive open online courses
that facilitate the capacity building for both teachers and students who will utilise
the framework.
4.3.1.2. European Union
In 2013, the Grand Coalition for Digital Jobs was launched, with a focus on e-skills
and education to enhance digital skills at the national, regional, and local levels
within EU member states. At that time, the EU sought to promote information
and communications technology (ICT) professionalism and to generate a more
extensive pool of entrepreneurs, business leaders, managers, and advanced users
through a specific emphasis on new ICT. Consequently, e-skills were defined and
implemented on a regional scale.
E-skills refer to the competencies required to optimise the utilisation and

development of ICT. These skills are grouped into three primary categories: ICT
practitioner skills, ICT user skills, and e-business skills. ICT practitioner skills target
individuals who work directly with ICT systems and require capabilities that
include researching, designing, producing, integrating, maintaining, and servicing
ICT systems. ICT user skills encompass the digital literacy skills necessary to use
common and specialised tools that support business functions within various
industries. Lastly, e-business skills comprise the abilities necessary to maximise
the potential of ICT, enabling organisations to conduct their businesses more
efficiently and effectively.9
To facilitate the acquisition and advancement of e-skills in the EU, E-Skills Match
was established in 2021.10 It affords individuals and businesses access to a
technology demonstration platform, which delivers training and support services
that enable them to remain competitive in the ICT sector. The initiative caters to
various user groups, including ICT professionals seeking to acquire new skills or
9
Eurostat, Glossary: E-Skills, https://ec.europa.eu/eurostat/statistics-explained/index.php?title=Glossary:E-
skills#:~:text=E%2Dskills%20or%20electronic%20skills,to%20apply%20and%20develop%20them
10
EC, E-Skills Match, https://www.eskillsmatch.eu/en/
150
to enhance existing ones, technical and vocational education and training (TVET)
institutions, higher education institutions, certification providers, and any other
parties interested in integrating online courses into their educational programmes.
4.3.1.3. Japan
Japan’s Ministry of Economy, Trade and Industry (METI) is spearheading efforts
to define the competencies to promote digital utilisation within enterprises. This
skill set encompasses not only knowledge and technical skills but also a specific
mind-set. METI aims to develop a framework that can be applied to executive and
general professionals. 11
The Information-Technology Promotion Agency developed a standardised skills

framework to cultivate world-class ICT human resources in Japan as well.12 The
framework was developed with reference to the Information Technology Engineers
Examination (ITEE) and three skills standards for ICT, user information systems,
and embedded technology. The Japan International Cooperation Agency (JICA)
supported Bangladesh in a similar endeavour as well, where ICT skills for engineers
to implement the ITEE were lacking (JICA, 2019).
4.3.2. Providing Inclusive Education
4.3.2.1. European Union
The EU4Digital Facility, launched in 2019 as part of the EU4Digital Initiative, exemplifies
the EU's efforts towards a resilient transformation in the Eastern Partnership
region.13 Its objective is to promote the integration of the six Eastern European
partner countries with the EU single market. To this end, the EU4Digital Broadband
Strategies project was established to help bridge the digital divide between
urban and rural areas while supporting the diversification and reconstruction of
broadband networks in these countries. The project's objective is to provide access
to internet infrastructure and services in a coordinated and centralised manner
(EU4Digital, 2022). As an example, the programme contributed recommendations
on 5G deployment in Belarus, which were incorporated into the country's overall
broadband strategy in 2021 (EU4Digital, 2021).
11
METI, Digital Skill Standards, https://www.meti.go.jp/policy/it_policy/jinzai/skill_standard/main.html [in
Japanese].
12
IPA, Common Career/Skill Framework, https://www.ipa.go.jp/en/it-talents/skill-standard/skill-framework.html
13
The Eastern Partnership is a joint initiative between the EU and six East European partner countries (i.e. Armenia,
Azerbaijan, Belarus, Georgia, Moldova, and Ukraine).
151
4.3.2.2. Public–Private Partnerships
Public–private partnerships are becoming increasingly common, with cloud

provisioning being an example. CloudSwyft, a private company established in
2015, collaborated with the Philippine Department of Education to create a cloud-
based educational solution. CloudSwyft provides campus lab infrastructure and
software tools to students, along with round-the-clock remote lab access and
customisable requirements, which can be accessed from mobile devices. This
solution is being implemented in universities, including De La Salle University, and
has also been extended to higher education institutions in Indonesia, Malaysia,
and Singapore.14
Further, in Indonesia, CloudSwyft has partnered with the government's Program

Kartu Prakerja, which aims to address the unemployment caused by the economic
impact of the COVID-19 pandemic. This labour capacity development programme
is designed for local citizens who are over age 18 years, secondary school or TVET
graduates, job seekers, and laid-off employees. Participants can choose from a
variety of online courses offered by CloudSwyft, including data analysis, artificial
intelligence (AI), and data science, as well as various certification programmes.
The programme aims to offer a diverse range of job opportunities, such as data
analysts, cloud support, system operations, and software engineering positions.15
4.3.3. Improving Human Resources Mobility
4.3.3.1. Mutual Compatibility of Qualifications
Mutual recognition agreement. The EU has established that certain professions

can be transported easily amongst EU member states, including medical
practitioners, medical specialists, dentists, veterinarians, pharmacists, nurses,
midwives, and architects.16 Under this system, a professional qualification
obtained in one EU member state is considered valid across all EU member
states.17 This recognition applies to professionals who seek employment or wish to
start their own businesses in another EU member state. To avail themselves of this
system, professionals can submit the necessary documents electronically to the
authorities of the host country through a common EU-wide system.18 To ensure the
14
CloudSwyft, https://cloudswyft.co/
15
CloudSwyft, Finding Your Career amidst the Covid-19 Pandemic, https://cloudswyft.co/finding-your-career-
amidst-the-pandemic/
16
Anerkennung in Deutschland, EU Recognition Directive, https://www.anerkennung-in-deutschland.de/html/en/
pro/eu-recognition-directive.php#
17
EC, Mutual Recognition Agreement, European Migration Network (EMN), https://home-affairs.ec.europa.eu/
pages/glossary/mutual-recognition-agreement_en
18
EC, Automatic Recognition, Internal Market, Industry, Entrepreneurship and SMEs, https://single-market-
economy.ec.europa.eu/single-market/services/free-movement-professionals/recognition-professional-
qualifications-practice/automatic-recognition_en
152
quality of professional qualifications, certain conditions have been established for
mutual recognition. For example, physicians must have a minimum of 5,500 hours
of medical education and a minimum of 5 years of work experience to be eligible
for mutual recognition within the EU.19 These stipulations have been put in place
to maintain high standards across professions and to ensure consistency in the
recognition process.
European Credit Transfer and Accumulation System. The European Higher

Education Area (EHEA) devised the European Credit Transfer and Accumulation
System (ECTS) to enhance the transparency of studies across all 48 member
countries of the EHEA, 27 of which are EU member states, with the remainder
comprising non-EU countries such as Armenia, Georgia, Montenegro, and
Switzerland.20 The goals of the ECTS are to facilitate student mobility amongst
member countries and to ensure that academic credits are fully recognised and
transferable. Given the differences in national higher education systems across
the EHEA, the ECTS promotes uniformity and mitigates potential issues related to
the recognition of academic requirements and study periods abroad. Moreover,
the ECTS allows for the seamless combination of different learning styles or
programmes, including work-based learning such as apprenticeships or on-the-
job training.
European Qualifications Framework. In 2008, the European Qualifications

Framework (EQF) was established to enhance transparency and mutual trust of
various qualifications across Europe (EC, 2018). In addition to the 27 EU member
states, 11 other countries have either implemented or are potential adopters of
the EQF.21 The EQF is an eight-level learning outcomes-based framework that
serves as a translation guide amongst the various qualification frameworks
implemented by member countries. The framework facilitates comparisons of
qualifications, as it is closely linked to the national qualifications of the member
countries. Ranging from level 1, which indicates the lowest level of proficiency,
to level 8, which indicates the highest, the EQF provides a clear indication of an
individual's knowledge and competencies. It enables employers to evaluate an
applicant's level of qualifications, given that it is standardised. Secondly, it serves
as a means of communication between employers and education and training
providers, by specifying the desired learning outcomes for various professions at
different levels.
19
EC, Recognition of Professional Qualifications in Practice, Internal Market, Industry, Entrepreneurship and
SMEs, https://single-market-economy.ec.europa.eu/single-market/services/free-movement-professionals/
recognition-professional-qualifications-practice_en
20
EC, European Credit Transfer and Accumulation System (ECTS), European Education Area, https://education.
ec.europa.eu/education-levels/higher-education/inclusive-and-connected-higher-education/european-
credit-transfer-and-accumulation-system
21
These include Iceland, Liechtenstein, and Norway, which are part of the European Economic Area and currently
apply the EQF, as well as Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North Macedonia, Serbia,
Switzerland, and Turkey, which are potential or candidate countries.
153
4.3.3.2. Migration Mitigation for Skilled Workers
United States–Mexico–Canada Agreement. During the tenure of former US

President Donald Trump, the North American Free Trade Agreement (NAFTA) was
renegotiated and replaced by the United States–Mexico–Canada Agreement
(USMCA) in July 2020.22 The USMCA introduces a provision wherein certain
professionals from the US and Mexico are eligible to apply for work permits in
Canada, thus circumventing the requirement of obtaining a labour market impact
assessment from a Canadian enterprise or a US/Mexican company operating
in Canada. This provision encompasses 63 professions, including accountants,
graphic designers, vocational counsellors, physicians, and veterinarians, and
permits individuals possessing these qualifications to remain in Canada for up to
3 years if they hail from the member countries.
4.3.4. Implications from Case Studies
Initiatives undertaken by ILO and the EU to define skill sets and to provide relevant
e-learning courses can serve as a reference for ASEAN–Japan collaboration. In
particular, ILO's integration and updating of global skill sets can guide the definition
of basic human resources competencies for the ASEAN–Japan region. Moreover,
the example of the EU's E-Skills Match programme could help refine these skill sets
in the ASEAN–Japan region. Online learning programmes can be offered under the
defined skill sets; collaboration with educational institutions and stakeholders will
be necessary while considering the language diversity in the ASEAN–Japan region.
Likewise, METI in Japan has developed digital skill standards that cover integrated
business and digital skills for management to general business personnel, which
can also serve as a useful reference for ASEAN–Japan collaboration.
For inclusive education, access to hard infrastructure – such as network

environments, smartphones, and tablets to guarantee a conducive learning
environment – is necessary, along with ways to provide content. EU4Digital
provides insights on the development of broadband environments in the ASEAN–
Japan region. The 5G high-speed network can be utilised in the educational
environment, and the EU's efforts to install 5G networks in Eastern Partnership
countries can serve as a reference for the construction of such infrastructure in
the ASEAN–Japan region. CloudSwyft is also an effective model for the flourishing
education technology industry in Japan and ASEAN.
To enhance the mobility of human resources, mutual recognition of qualifications

must be promoted, and the utilisation of reference frameworks for qualifications
and learning status must be expanded. The scope of occupational areas to be
covered should grow, and the localised conditions required for qualifications
Office of the United States Trade Representative, United States-Mexico-Canada Agreement, Trade Agreements,
22
https://ustr.gov/trade-agreements/free-trade-agreements/united-states-mexico-canada-agreement
154
in each AMS and Japan should be noted. Mutual recognition of qualifications
throughout ASEAN requires standardisation of learning content required to obtain
the qualification. Expanding the number of schools and faculties eligible for credit
transfer in the ASEAN–Japan region is necessary to promote mutual recognition
of qualifications.
4.4. Digital Economy

To foster innovations that leverage cutting-edge technologies and disruptive
business models, it is imperative to examine and potentially to modify existing
regulations that hinder the innovation environment. Special applications and
allowances may be implemented that facilitate the development of novel solutions.
Case studies in this context comprise EU initiatives for multilateral patent unification,
which aim to streamline and harmonise the patent system across participating
countries. Additionally, regulatory sandbox programmes have been established in
various countries to create a controlled environment that allows innovators to test
their solutions under a temporary and tailored regulatory framework.
4.4.1. Unified Patent Court Agreement
As a fundamental principle of patent law, the validity of a patent is restricted to

the country where the patent is granted. Patent rights are conferred on a country-
by-country basis, which is referred to as the principle of patent independence. To
obtain the right to use a patent in another country, it is essential to secure patent
rights in each desired country.
The EU has been striving to establish a unified patent scheme within the region,
which is slated to become operational in 2023.23 The Single European Patent System
will allow a single patent to be protected in all EU member countries. This system
will eliminate the previous requirement for validation in each European country,
making patent applications more convenient, as patents can be registered in
Europe on a one-stop basis.
As in other areas of law, the EU's current intellectual property law framework
comprises a two-tier system, with one tier at the European level and another
at the level of each member state. Intellectual property rights such as patents,
trademarks, designs, copyrights, and trade secrets are safeguarded under the
national law of each member country (with utility model rights protected in some
nations). As the requirements and substance of such rights differ based on national
laws, however, efforts have been made to harmonise them. Furthermore, a system
to safeguard intellectual property rights based on treaties at the European level
has been established and expanded.
Unified Patent Court, About the Unified Patent Court, https://www.unified-patent-court.org/en

23
155
4.4.2. Regulatory Sandbox
Regulatory sandboxes are limited initiatives within a single country. No effective

bilateral or multilateral cases were identified.
4.4.2.1. United Kingdom
The Financial Conduct Authority of the United Kingdom (UK) established a

regulatory sandbox in 2016, which received 501 applications as of June 2021, of
which 159 were accepted.24 In August 2021, the sandbox was modified to enhance
its accessibility to a broader range of applicants. It also has launched a digital
sandbox in collaboration with the City of London in 2021. To apply for the regulatory
sandbox, firms must meet eligibility criteria and submit applications. Once
approved, participating firms can provide financial services in the market without
obtaining the requisite permits and licenses, subject to an agreed-upon limited
scope with the Financial Conduct Authority.25 The demonstration period within the
sandbox may last up to 12 months, with shorter options of approximately 2 months.
Additionally, applications are accepted continuously, allowing firms to conduct
demonstrations as per their services development cycle from 2021.
4.4.2.2. Spain
In 2022, the EU launched its inaugural AI sandbox in Spain (EC, 2022b). The sandbox
is intended to serve as a pilot project that will inform forthcoming European AI
legislation. The Government of Spain initiated a demonstration to establish optimal
practices to guide the future application of EU AI regulation. The EU intends to enact
such legislation by the end of 2024 based on this demonstration. Concurrently,
other EU member states are being urged to join or to adopt comparable initiatives
to establish a pan-European AI sandbox system.
4.4.2.3. Republic of Korea
In April 2019, the Government of Korea enacted the Special Act on Financial
Innovation Support, which established a regulatory sandbox for the financial
sector. Under this initiative, firms can apply to the Financial Services Commission
for entry.26 Within 30 days, the Financial Services Commission will respond to the
applicant, indicating any conflicts with regulations under its jurisdiction; it may
also grant exemptions from these regulations subject to the provision of special
insurance and clarification of liability.
The regulatory sandbox provides a platform for firms to test their financial
services under specific conditions. From April 2019 to September 2021, over 150
24
FCA, https://www.fca.org.uk/
25
It is a legal requirement for businesses offering financial services in the UK to be licensed or registered.
26
FSC, https://www.fsc.go.kr/eng/index
156
applications were approved. According to the Fintech Center Korea (2021), the
regulatory sandbox is available for up to 2 years, with an extension of 18 months
upon request. Applications are open to enterprises that have registered their
businesses in Korea. 27
The regulatory sandbox offers various incentives to encourage participation.

Except for certain parameters specified at the time of certification – such as
maximum numbers of customers or transaction amounts – no restrictions exist.28
Public authorities provide financial support for costs associated with implementing
services designated in the sandbox system, premiums for insurance to protect
users, and other expenses related to expanding business overseas.
4.4.2.4. Australia
The Australian regulatory sandbox was introduced in 2016 (Financial Services

Council, 2016) and underwent significant revision in 2020, which included
expanding the services covered, lengthening the demonstration period to a
maximum of 24 months, and not limiting the number of service uses. It operates
under the assumption that the services of operators are subject to financial and
other regulations. In the sandbox, adopting firms receive a temporary exemption
from regulatory compliance to test their financial services in the market, subject
to specific conditions. Foreign-affiliated companies registered in Australia may
apply for registration in the sandbox, as authorised by the Australian Securities
and Investments Commission (ASIC).29 Firms intending to utilise the regulatory
sandbox must provide ASIC with a notification, which is reviewed within 30 days.
Feedback is provided on the approval or rejection of the licensing exemption.
4.4.2.5. Japan
In June 2018, METI introduced a regulatory sandbox that focusses on innovative

technologies such as Internet of Things (IoT), blockchain, and robotics, as well
as novel business models like platform-based businesses and the sharing
economy.30 The regulatory sandbox allows firms to conduct demonstrations, with
regulatory approval, in cases where the social implementation of technologies
and business models is hindered by current regulations. The data gathered during
these demonstrations are used to inform regulatory reviews. As of 2022, 18 cases
received approval, covering various industries and themes such as blockchain,
robotics, and home electronics with IoT technologies.
27
Fintech Center Korea, Introduction, Sandbox Korea, https://sandbox.fintech.or.kr/quickcheck/quickcheck_
Introduction.do?lang=en
28
Fintech Center Korea, Post-Designation Support Guide, Sandbox Korea, https://sandbox.fintech.or.kr/financial/
support.do?lang=en
29
ASIC, Enhanced Regulatory Sandbox, Innovation Hub, https://asic.gov.au/for-business/innovation-hub/
enhanced-regulatory-sandbox/#:~:text=The%20sandbox%20allows%20natural%20persons,credit%20licence%20
(credit%20licence)
30
METI, Gray Zone Elimination System, Project-Based ‘Regulatory Sandbox’ and Special Exception System for New
Businesses, https://www.meti.go.jp/policy/jigyou_saisei/kyousouryoku_kyouka/shinjigyo-kaitakuseidosuishin/ [in
Japanese].
157
Japan has also supported schemes that enable enterprises to assess whether
their business plans are subject to specific regulations.
Europe is a significant market for start-ups aiming to expand globally over the
medium to long term. Hence, implementing a single European patent scheme is an
essential step for enterprises to safeguard their intellectual property rights in the
entire region. The region is also a leader in environmental, social, and governance
(ESG) initiatives, which have gained increased recognition in recent years.
The EU's single patent system is expected to enable start-ups to file international
patent applications that they had previously abandoned due to financial or
other constraints. This is expected to result in more patent applications – not
only by large enterprises but also by start-ups. The establishment of a unified
patent system in the ASEAN–Japan region would also be expected to facilitate the
registration of patents by foreign companies and to contribute to improving the
business environment for start-ups, as in the EU.
Regulatory sandboxes have been primarily introduced in the financial industry,

while Japan has been expanding its coverage to various industries. Demonstrations
of actual service provision to users have been widely accepted, particularly in the
UK and Korea. To encourage use, regulatory sandboxes should first be introduced
in specific industries; expanding the number of authorised firms will foster
momentum.
Positioning the demonstration of a specific country as a pilot project in a regional

association and linking it to the future deregulation of the entire region can
promote innovation within the region, as demonstrated in Spain. Providing a
minimum period of a few weeks and a maximum period of years enables diverse
types of applications. In some countries, sandboxes are only open for applications
at certain times of the year; however, as in Korea and Australia, leaving the
application windows open for companies without a specific application period
promotes use, as the sandbox application timing may not necessarily coincide
with a company's new service or product development process.
It would also be beneficial to offer official support, such as financial or financial-

related incentives for businesses, as in Korea. The possibility of receiving public
support for market deployment upon certification of an applicant's new business
as an innovative service would encourage participation.
158
4.5. Sustainability
To achieve carbon neutrality in the ASEAN–Japan region, it is crucial to undertake
efforts aimed at establishing regulatory frameworks and optimising electricity
consumption. The case studies expound on initiatives to formulate international
protocols, develop an intra-regional electricity network, and enforce carbon-
pricing policies.
4.5.1. Carbon Credits
During the 27th Conference of the Parties to the United Nations Framework
Convention on Climate Change, Japan announced the launch of the Paris
Agreement Article 631 Implementation Partnership, a programme intended
to invigorate decarbonisation markets and private investment, facilitate the
reduction of greenhouse gas (GHG) emissions, and stimulate economic growth
(MOE, 2022). It aims to support capacity building by promoting an understanding
of the Paris Agreement's rules and providing training, as well as facilitating the
implementation of Article 6 and linkages with nationally determined contributions
(NDCs).32 It includes areas of work such as sharing good practices, developing
an informational platform for Article 6 implementation, supporting baseline
methodology, and designing high-integrity carbon markets.
Japan has been at the forefront of GHG reduction trading, having introduced
a unique trading system, the Bilateral Credit Mechanism, in 2013. Under this
mechanism, known as the Joint Crediting Mechanism (JCM), Japan has partnered
with 22 countries in Asia, Africa, and Latin America, carrying out over 200 projects,
including support for the early stages of renewable energy production. Many
Japanese companies are also participating in the programme.
As of the launch in November 2022, the Paris Agreement Article 6 Implementation

Partnership has had participation from 23 organisations from 40 countries,
including Cambodia, the Philippines, Singapore, and Thailand (MOE, 2022). The
initiative aims to involve more than 100 countries. Amongst the numerous individual
credit initiatives worldwide, the bilateral credits that Japan has been promoting
are expected to become a global standard.
31
GHG reduction trading is a mechanism in which developed countries provide developing countries with funds
and technologies that lead to GHG reductions, with a portion of the reduced amount credited to developed
countries' reductions. This mechanism is stipulated in Article 6 of the Paris Agreement, which was adopted in 2015.
Guidelines for its implementation were agreed upon in 2021.
32
NDCs are the efforts that each country aim to make to reduce national emissions and to adapt to the impacts
of climate change.
159
4.5.2. Regional Power Grid
An international power grid offers numerous benefits, including ensuring a reliable

power supply during times of crises, promoting the integration of renewable energy,
and providing access to cost-effective electricity. The EU power grid boasts the
highest number of interconnections in the world.33 Several EU member states have
also established super grids, which facilitate high-capacity power transmission.
Denmark, Germany, the Netherlands, and Norway, for instance, have established
large transmission networks consisting of high-voltage or ultra-high-voltage
direct current power lines as well as interconnection capabilities with neighbouring
countries. Denmark's multilateral transmission network is an exemplary super grid
that meets the country's peak electricity demand. This network leverages the
benefits of the country's energy mix, which includes wind and hydroelectric power
generation, and capitalises on its geographical advantages. Furthermore, surplus
power is stored within each country, thanks to the flexibility of electricity exchange
amongst countries. Some EU member states have high import rates (e.g. Belgium
and Italy) or high export rates (e.g. France, Germany, Norway, and Sweden).
The UK, being an island surrounded by the sea, has been actively promoting
offshore wind power and utilising international interconnection lines to import and
to export electricity to secure a stable power supply, while phasing out old thermal
power plants and reducing domestic electricity prices. The country has already
connected to others through undersea transmission lines, and several additional
international transmission lines are currently in the planning stages (IRENA, 2020).
This development aligns with the growth of the pan-European wholesale electricity
market.
4.5.3. Carbon Pricing

Carbon pricing includes emissions trading and carbon taxes and other initiatives
as per the World Bank.34
4.5.3.1. European Union Emissions Trading System

The EU was the first global entity to introduce an emissions trading market through
the establishment of the European Union Emissions Trading System (EU-ETS) in
July 2021. The primary objective is to attain climate neutrality within the EU by
2050, with an intermediate goal of achieving a net reduction of at least 55% of GHG
emissions by 2030.35 The EU-ETS operates on the cap-and-trade principle, which
entails setting a cap on the aggregate quantity of GHG emissions allowed by the
installations covered by the scheme. This cap is progressively reduced over time
33
EC, Electricity Network Codes and Guidelines, Energy, https://energy.ec.europa.eu/topics/markets-and-
consumers/wholesale-energy-market/electricity-network-codes-and-guidelines_en
34
World Bank, What Is Carbon Pricing? Carbon Pricing Dashboard, https://carbonpricingdashboard.worldbank.
org/what-carbon-pricing
35
EC, EU Emissions Trading System (EU ETS), Climate Action, https://climate.ec.europa.eu/eu-action/eu-
emissions-trading-system-eu-ets_en
160
to ensure an overall reduction in emissions. However, since the installations have
the option to purchase or to receive emission allowances that are exchangeable,
the cap applies to the collective group. At the end of each year, the installations
must surrender sufficient credits to cover their emissions or risk facing significant
financial penalties.
The EU-ETS approach fosters the development of innovative, low-carbon

technologies by stimulating investment. It covers several sectors and various
gases, including carbon dioxide, nitrous oxide, and perfluorochemicals.
4.5.3.2. Carbon Border Adjustment Mechanism
In July 2021, the EU-ETS implemented the Carbon Border Adjustment Mechanism
(CBAM) to counteract the phenomenon of carbon leakage, which involves shifting
carbon-intensive economic activity to regions with lax climate policies (EC, 2021).
The CBAM represents a nascent set of trade policy tools aimed at promoting
climate mitigation while ensuring compatibility with World Trade Organization
standards. The risk of carbon leakage undermining EU climate efforts is a key
concern.
The CBAM involves imposing a carbon charge on imports from countries that
lack adequate climate-change measures, thereby equalising trade terms and
avoiding a competitive disadvantage for countries with more stringent climate
policies. The implementation of a reporting system for high-risk products – such
as iron and steel, cement, fertilizer, aluminium, and electricity – is planned for 2023
to facilitate discussion and to ensure a smooth roll-out. Importers of high-risk
products will begin paying financial adjustments from 2026.
4.5.4. Waste Disposal and Recycling Systems
The extended producer responsibility (EPR) principle underpins several waste

treatment and recycling systems, whereby producers are held partly accountable
for the environmental impact of their products during the entire product life cycle,
encompassing raw material selection, production processes, usage, and disposal.
In 2001, the Organisation for Economic Co-operation and Development (OECD)
introduced the concept of EPR in its Guidance Manual on Extended Producer
Responsibility, and a revised definition was released in 2016.36
36
OECD, Extended Producer Responsibility, Environment, https://www.oecd.org/env/tools-evaluation/
extendedproducerresponsibility.htm
37
EU, EU Waste Management Law, EUR-Lex, https://eur-lex.europa.eu/EN/legal-content/summary/eu-waste-
management-law.html
161
4.5.4.1. European Union Waste Management Laws
The EU employs Directive No. 2008/98/EC, also known as the EU Waste Management
Law, as a legal framework for managing waste in the region.37 The objective is
to safeguard the environment and human health through appropriate waste
management, recovery, and recycling techniques. The directive outlines a
waste hierarchy that prioritises waste prevention; preparing for reuse, recycling,
and other forms of recovery; and disposal. A notable principle is polluter pays,
which holds companies liable for environmental damage that they cause and
requires them to take necessary preventative or remedial action at their own
expense. The EPR approach is highlighted in the directive, which places financial
or physical responsibility on producers for the treatment or disposal of post-
consumer products. In addition to these key points, the directive emphasises the
development of waste-management plans and waste-prevention programmes.
In 2018, an amending directive, Directive No. 2018/851, was introduced as part

of the circular economy package, which establishes the minimum operating
requirements for EPR schemes and reinforces regulations on waste prevention
and generation. This directive highlights supporting sustainable production and
consumption models, encouraging the availability of spare parts, and stopping
marine waste generation. The directive also sets new municipal waste recycling
targets and encourages incentives for the waste hierarchy.
Although each EU member state has its own national waste disposal laws and
regulations, all are required to comply with common EU legislation. Such legislation
outlines actions that EU member states must take, such as promoting the design,
manufacturing, and use of resource-efficient, durable, reparable, reusable, and
upgradable products.
4.5.4.2.Guide to European Union Practices on Waste Recycling Technologies
In 2016, the EU funded the Guide to European Union Practices on Waste Recycling
Technologies, which aims to promote waste disposal and recycling efforts within
the region (EU and Waste Free Rivers for a Clean Black Sea Project, 2020). As part
of this effort, EU member states are collaborating to achieve unified goals, such
as recycling at least 55% of general waste by 2025, 60% by 2030, and 65% by
2035. These targets mark a significant shift from a linear economy to a circular
economy, where reuse, repair, and recycling become the norm. The transition to
a circular economy is expected to create approximately 580,000 new jobs and to
reduce GHG emissions by 62 million tonnes by 2030, yielding both environmental
and economic benefits.
To achieve these goals, the EU has implemented several measures, including

mandatory separate collection of food waste, revision of the EU Waste Management
Law, compulsory collection of bio waste, and stricter producer responsibility
regulations. Countries that have achieved their recycling targets, such as France,
162
are providing technical assistance to countries that require support, such as Spain,
to meet the EU's 2030 goals.
4.5.4.3. Containers and Packaging Recycling Law
The Containers and Packaging Recycling Law is said to be the first law in Japan
to incorporate the EPR concept (Aoki, 2017). Mass production, consumption,
and disposal were rampant during the high-growth era in Japan; there were
insufficient disposal sites to accommodate all the waste. To help address this
issue, the government enacted the Containers and Packaging Recycling Law in
1997, which defines the roles and responsibilities of parties involved in the disposal
of containers and packaging waste.38
The law designates three parties responsible for container and packaging
waste management: consumers, municipalities, and businesses. Consumers
are responsible for sorting and disposing of waste, municipalities for sorting and
collecting waste, and businesses for recycling waste. The law mandates that the
three parties work collaboratively to reduce container and packaging waste.
Businesses must outsource recycling to designated corporations and bear the
costs while making efforts to reduce packaging waste by using thinner and lighter
containers, selling by weight, and charging for plastic bags. Consumers are not
subjected to any cost burdens. Businesses involved in the use, manufacture, or
import of containers and packaging are considered producers, and the law covers
metal, glass, paper, and plastic containers.
Implementation has resulted in significant progress in sorted collection and

recycling. There has been a decrease in the final disposal volume of general
waste, and the lifespan of final disposal sites increased from 8.5 years in 1995 to
22.4 years in 2020.39
4.5.4.4. Home Appliance Recycling Law
Prior to the enactment of the law, nearly half of used home appliances from
households in Japan were directly landfilled without any form of processing.
In certain instances, metallic components, such as iron, were retrieved after
undergoing shredding. Enacted in 1998, the Home Appliance Recycling Law aims
to reduce waste and to promote efficient resource utilisation by recycling useful
parts and materials from home appliances such as air conditioners, televisions,
refrigerators/freezers, and washing machines/clothes dryers that are discarded
from households and offices.40 The legislation requires the take-back of used
appliances by retailers and their recycling by manufacturers and importers.
38
MOE, What Is the Containers and Packaging Recycling Law, https://www.env.go.jp/recycle/yoki/a_1_recycle/
index.html [in Japanese].
39
Japan Containers and Packaging Recycling Association, https://www.jcpra.or.jp/english/tabid/603/index.php
40
MOE, Overview of Home Appliance Recycling Law, https://www.env.go.jp/recycle/kaden/gaiyo.html [in
Japanese].
163
Consumers are required to pay a fee under the exclusive EPR scheme of this law
when returning their used equipment to retailers, and the fee is determined by the
producer (Gupt and Sahay, 2015). According to METI (2022), roughly 16 million units
of eligible household equipment waste were collected in 2020, marking the sixth
consecutive year of year-on-year growth for the programme.
Japan has been disseminating its waste management technologies and

knowledge via international cooperation programmes. JICA provides support in
three phases based on the recipient country's development stage: enhancement
of public health, reduction of environmental burden and pollution prevention, and
realisation of a recycling-oriented society via the 3Rs.41 As an illustration of Japan's
aid to ASEAN through JICA, the second phase was conducted in Thailand between
2011 and 2015.42 Under the third phase, JICA also provided aid to Indonesia through a
Japanese company in 2017. Furthermore, JICA has been sending human resources
to countries in ASEAN for waste management and environmental education.43
4.5.5. Regional Recycled Product Certification
EuCertPlast is an official certification body for companies that manufacture

recycled products that comply with EU standards.44 This scheme was developed
through a 3-year project that was co-financed by the EC under the Eco-Innovation
programme. The scheme focusses on the traceability of plastic materials and
quality control of recycled content in end-products. The objectives are to recognise
recyclers operating according to high standards and to implement best practices.
4.5.6. Regional Information Exchange Platform
The technical assistance and information exchange instrument of the EC

environmental implementation review peer-to-peer tool serves as a mechanism
for knowledge transfer amongst environmental authorities. Its primary aim is to
extend support to national authorities responsible for implementing environmental
regulations and policies throughout the EU.45 By facilitating information exchange,
this tool promotes innovation, accelerates progress, and provides an opportunity
for EU member states to learn from each other's best practices and policies. This
technology emphasises various aspects of environmental governance, including
access to justice, environmental liability, and compliance assurance. It offers four
short-term activities – expert missions, study visits, workshops, and remote work –
that can be availed by EU member states.
41
JICA, Environmental Management (JICA Clean City Initiative), JICA Activities, https://www.jica.go.jp/english/
our_work/thematic_issues/management/activity.html
42
JICA, Project for the Development of Basic Schemes for PRTR System in Kingdom of Thailand, Thailand, https://
www.jica.go.jp/project/english/thailand/013/index.html
43
JICA, Civil Participation, Types of Assistance, https://www.jica.go.jp/english/our_work/types_of_assistance/
citizen/volunteers.html
44
EuCertPlast, https://www.eucertplast.eu/
45
EC, TAIEX-EIR PEER 2 PEER Tool, Environmental Implementation Review, https://environment.ec.europa.eu/law-
and-governance/environmental-implementation-review/peer-2-peer_en
164
Japan's extensive experience in implementing bilateral credits with various

nations has resulted in four AMS agreeing to join the Paris Agreement Article 6
Implementation Partnership as of November 2022. All AMS are encouraged to
participate in the effort to establish a global standard for bilateral credits, of which
there are several examples. In addition, ASEAN's renewable energy initiatives
should be promoted within the context of the current ASEAN Power Grid initiative,
particularly for AMS with electricity pipelines that span multiple AMS (ACE, 2020).
The multilateral transmission technology realised in 2022 in the EU should be

extended to AMS to improve connectivity.46 A desirable approach would be to
emulate Denmark's multilateral transmission model, which provides most domestic
electricity capacity from a mix of clean energy sources. Indeed, Singapore began
importing hydroelectric power from the Lao People’s Democratic Republic in 2022
through an international power grid system involving Thailand and Malaysia –
the first time that Singapore has imported renewable energy from outside of the
country. Despite ASEAN having less contiguous land than the EU, this intercountry
power grid system is a significant step towards ensuring a reliable electricity
supply in the region.
Japan has limited energy resources and has experienced large-scale power
outages due to earthquakes throughout its history. Previously, each electrical firm
supplied power to Japan's transmission and distribution network, which restricted
the flow of electricity throughout the country. This problem can be prevented by
using international interconnection lines (i.e. to ASEAN) for emergency power
supply. This would be particularly effective in areas in Japan where the scale of
interconnection lines with other areas is small. Furthermore, if Japan's energy mix
is enhanced with renewable energy by connection to an international grid, multiple
advantages are evident, such as reducing GHG emissions, improving energy self-
sufficiency, and securing energy in emergencies.
The introduction of carbon pricing in ASEAN has varied. In general, emissions

trading schemes in the ASEAN region are more advanced than carbon taxes. Since
its enactment of a carbon tax in 2019, Singapore intends to considerably increase
the tax amount from 2019 to 2030.47 On the other hand, Thailand, Indonesia, the
Philippines, and Viet Nam are planning to introduce emissions trading schemes
for some industries and are conducting associated pilot projects (Liu and Nedopil
Wang, 2021).
46
The USMCA has a transmission network between the US and Canada, but the total amount of electricity is only
a few percentage points, far from that of the EU (Vine, 2017).
47
National Climate Change Secretariat of Singapore, Carbon Tax, https://www.nccs.gov.sg/singapores-climate-
action/mitigation-efforts/carbontax/#:~:text=Singapore%20implemented%20a%20carbon%20tax,period%20
for%20emitters%20to%20adjust
165
Some countries in Asia have begun operating a unified national emissions
trading market as of 2022. The Government of China estimates that the volume
of emissions trading in China will eventually reach 8 billion tonnes, making it a
huge emissions market (Liu and Nedopil Wang, 2021). In Japan, the Tokyo Stock
Exchange also began a demonstration test of emissions trading in 2022 (Japan
Exchange Group, 2022).
It is important to support these AMS efforts, which promote policies that support
the overall lowering of GHG emissions amongst member states. Moreover, the
initiatives of Singapore and Japan should be connected to other countries given
their clear knowledge advantage and expertise in those fields.
EU carbon adjustment initiatives have featured more advanced studies where

emissions trading markets are already operational and multilateral efforts are
in progress. AMS should similarly research and evaluate carbon trading in each
country before implementing it. It would be beneficial for AMS to observe how the
EU carries out the CBAM as well.
A circular society can be formed by collecting waste, recycling it, and distributing
recycled products to the market based on standards. It is desirable to expand
the distribution market for such recycled products to the entire ASEAN–Japan
region. The establishment of a large cross-national distribution market would
provide an incentive for companies and other stakeholders to enter the recycling
market. Moreover, EU efforts to establish standardised guidelines for waste
disposal in the region as part of its efforts to realise a circular economy could be
considered in ASEAN. The EU Waste Management Law provides a clear framework
on organisational hierarchies that should be followed. The recycling model used
by the EU, which emphasises both environmental and financial gains that can be
made through the shift from a linear to a circular economy, is another method
that ASEAN may adopt.
Currently, waste management is governed by different laws and regulations in

Japan and ASEAN. EPR is growing as the fundamental rule for waste treatment
around the globe. In ASEAN, waste treatment should be implemented by ensuring
its reliable application, especially in least-developed countries. Further, recycling
certification bodies should also be introduced to give more legitimacy to a future
process in AMS. The EU initiative to establish a certification body for recycled
products is a case study that can be referred to in the future when the ASEAN–
Japan region is considered a single market for the distribution of recycled products.
Establishing a common certification body within the region and having that body
certify recycled products within the region based on common rules would promote
market integration of recycled products. The historical knowledge of Japan will be
key to developing the legislation, as Japan has developed domestic legislation
based on EPR principles and updated it as needed.
166
Finally, peer-to-peer initiatives are helpful to advance regional initiatives if AMS
review or provide input on laws, programmes, and systems that they experienced.
This contributes to the promotion of private sector cooperation if the programmes
are backed by official licensing bodies or trade blocs.
167
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172
CHAPTER 5
The Current ASEAN–Japan


and East Asia
5.1 Introduction
This chapter aims to provide a comprehensive understanding of the current

economic cooperation frameworks between the Association of Southeast Asian
Nations (ASEAN) and Japan and their way forwards. First, the chapter provides a
brief overview of the two ongoing economic cooperation programmes between
ASEAN and Japan. Then, it explores the challenges that both face, highlighting steps
necessary to achieve a sustainable and resilient future together. The discussion is
centred around four key areas: (i) trade and investment, (ii) digital and innovative
economy, (iii) sustainable development, and (iv) a professional workforce for the
future.
5.2. Ongoing ASEAN–Japan Economic Cooperation Programmes
There are two ongoing economic cooperation programmes between ASEAN and
Japan: (i) the renewed ASEAN–Japan 10-year strategic economic cooperation
roadmap (Sisoulith, 2016), which was endorsed during the 22nd ASEAN Economic
Ministers (AEM) and Government of Japan, Ministry of Economy, Trade and
Investment (METI) Consultations on 6 August 2016;1 and (ii) ASEAN–Japan Economic
Resilience Action Plan, which was adopted at the Special AEM–METI Virtual Meeting
on 29 July 2020 (AEM–METI, 2020).
1
The roadmap was endorsed as a revision of the original ASEAN–Japan 10-year strategic economic cooperation
roadmap, which was endorsed at the 18th AEM–METI Consultations on 30 August 2012, in response to the ASEAN
Economic Community Blueprint 2025 (ASEAN, 2015), which was adopted at the 27th ASEAN Summit on 27
November 2015.
173
The primary objective of the roadmap is the achievement of ASEAN Economic
Community Blueprint 2025 (ASEAN, 2015); Japan is supporting ASEAN to reach the
roadmap’s goals through investment and technical cooperation. The roadmap has
three objectives: enhancing bilateral economic cooperation between each AMS
and Japan, boosting economic integration of ASEAN, and enhancing cooperation
for integrating ASEAN into the global economy.
The first objective comprises five pillars of ASEAN–Japan economic cooperation:

human resources development, small and medium-sized enterprise (SME)
development, Mekong industrial development, infrastructure development, and
innovation and transfer of technology. Human resources development involves
supporting ASEAN Member States (AMS) through various concrete measures, as
Japanese companies are currently facing an imbalance of supply and demand
in industrial human resources. SME development focusses on supporting ASEAN
SMEs through knowledge sharing and capacity building. For Mekong industrial
development, individual cooperation projects are being implemented based
on the Mekong Industrial Development Vision, which was adopted at the 7th
Mekong–Japan Economic Ministers’ Meeting on 24 August 2015.2 Note that this was
succeeded by the Mekong Industrial Development Vision 2.0, which was endorsed
at the 11th Mekong–Japan Economic Ministers’ Meeting on 10 September 2019.3
Infrastructure development is essential for ASEAN economic development,

and Japan is expanding its support for quality infrastructure there through the
Partnership for Quality Infrastructure initiative, which was announced by Prime
Minister Shinzo Abe at the 21st International Conference on the Future of Asia on
21 May 2015.4 Innovation and transfer of technology are also critical for ASEAN
productivity growth and long-term competitiveness; ASEAN and Japan thus aim to
2
The vision was formulated by METI, focussing on the Mekong region as both a production and consumer market. The
‘Thailand-Plus-One’ trend amongst Japanese companies led to the expansion of industrialisation into Cambodia,
the Lao People’s Democratic Republic (Lao PDR), and Myanmar. The vision promoted the concept of specialisation
and collaboration to achieve regionally integrated, continuous development through mutual complementarity
between countries, prioritising industries in which each country has strengths. The vision expected that the Mekong
region – which is adjacent to China, India, and various AMS – would become the core of a value chain between
Asia and the rest of the world (METI, 2015).
3
The new vision takes into account progress and changes since the implementation of the Mekong Industrial
Development Vision. It aims to improve the quality of life in the Mekong region through innovation. Japan is
focussing on areas in which it has expertise and/or advantages, while listening to the Mekong countries to achieve
this vision. Upgrading existing industries, such as agriculture and manufacturing, and supporting micro and SMEs
are prioritised; digital innovation and achievement of the Sustainable Development Goals are key elements in
achieving resilient economic growth in the region (METI, 2019).
4
Quality infrastructure is initially expensive but cost-effective in the long run due to its durability, environmental
friendliness, and disaster resilience. It also improves connectivity amongst Asian countries, creates job opportunities,
enhances local skills, and improves people's lives (MOFA, MOF, METI, MLIT, 2015). The initiative stated that the
Government of Japan will provide about $110 billion for quality infrastructure in Asia over 5 years in collaboration
with the Asian Development Bank (Izumi, 2017). The initiative was expanded to provide about $200 billion for
worldwide quality infrastructure investment from 2017 to 2021 in May 2016 (Izumi, 2017).
174
adapt to the Industry 4.0 through building human resources capacity, transferring
technology, and utilising and protecting data.
The second objective details seven pillars of ASEAN economic integration, with
a focus on Japan's involvement in supporting AMS in various sectors. The pillars
include SME development, intellectual property, standardisation, customs, industry
and services, trade facilitation, and energy. Japan is supporting ASEAN's emphasis
on the development and promotion of micro and SMEs and is helping increase
their competitiveness in regional production networks. In the area of intellectual
property, ASEAN and Japan continue to deepen their cooperation through
meetings and the approval of an action plan for patent examination, accession
to international treaties, and application administration. Japan also supports
standardisation activities and implementation of the ASEAN Standards and
Conformance Strategic Plan, 2016–2025 (ASEAN, 2016). Regarding customs, Japan
provides technical cooperation programmes for AMS, focussed on streamlining
and simplifying administrative and regulatory regimes. Japan also seeks to
build networks with AMS to enhance their competitiveness in services and trade
facilitation. Lastly, Japan supports ASEAN's efforts in achieving the ASEAN Plan of
Action for Energy Cooperation 2016–2025 Phase II, which aims to enhance energy
connectivity and market integration in ASEAN for energy security, accessibility,
affordability, and sustainability (ACE, 2020).
The third objective is to foster cooperation between ASEAN and Japan in promoting
ASEAN integration into the global economy. This approach involves strengthening
supply chains and connectivity and nurturing emerging industries such as the
digital economy, services, SMEs, and health care. The private sector's input is key to
this process. Furthermore, ASEAN and Japan aspire to establish the ASEAN–Japan
Innovation Network, a business network aimed at developing emerging industries.
The ASEAN–Japan Economic Resilience Action Plan is consistent with the roadmap's
underlying premise of Japan's capacity to contribute. The action plan was
compiled at the beginning of the COVID-19 pandemic and covers the responses
to the pandemic. It has three objectives: (i) sustaining the close economic ties
between ASEAN and Japan, (ii) mitigating an adverse impact on the economy,
and (iii) strengthening economic resilience.
The first objective aims to sustain the economic ties between ASEAN and Japan
through various measures, including the full implementation and utilisation of
the ASEAN–Japan Comprehensive Economic Partnership (AJCEP) agreement,
enhancing industrial cooperation in sectors such as automotive and chemical,
improving cooperation on intellectual property rights, and realising the Mekong
Industrial Development Vision 2.0. The action plan also seeks to prevent the
imposition of non-tariff measures that could restrict the trade of essential goods
and disrupt regional supply chains by simplifying and streamlining non-tariff
measures and facilitating the operation of existing ASEAN mutual recognition
175
arrangements. Additionally, the action plan provides capacity-building assistance
to promote manufacturing; auxiliary industries; and services competitiveness,
export competitiveness, and economic diversification in the region. Finally, it
seeks to enhance ongoing projects that improve supply chain connectivity and
promote trade facilitation and e-commerce by supporting the regional digital
trade transformation occurring in ASEAN and implementing a digital strategy to
protect businesses as they explore opportunities in digital trade and e-commerce
there.
The second objective aims to mitigate the adverse impact of the COVID-19
pandemic on the ASEAN economy. The objective includes promoting the
exchange of information and sharing best practices on economic policies with
Japan; facilitating the smooth flow of essential products; enhancing support for
businesses, particularly micro and SMEs and those of vulnerable groups affected
by the pandemic; and promoting start-ups with digital technologies. Measures
include establishing consultations for affected businesses, developing policy
recommendations based on the analysis of the effect of economic measures and
industrial policies, and providing financial support for businesses. It also aims
to identify the specific digital technology needs of micro and SMEs, establish an
innovation network for start-ups and investors, and promote digital transformation
and Industry 4.0 in ASEAN.
The third objective aims to strengthen economic resilience by enhancing supply

chain resilience, building capacity for emergency preparedness and response,
strengthening networks to facilitate interactions of relevant stakeholders, and
exploring public–private partnerships (PPPs) in strategic sectors. Programmes
include financial support for strengthening overseas supply chains, capacity
building for efficient factory management with Internet of Things (IoT)
technologies, and technical cooperation programmes for industrial promotion
and management innovation with new technologies such as IoT and artificial
intelligence (AI). Cooperative frameworks are planned to build capacity for
emergency preparedness and response for supply chains, and interactions
amongst relevant stakeholders in the region are expected to be strengthened
through various projects and workshops. PPPs are to be explored in strategic
sectors such as the agri-food industry, health-related industries, and energy.
Both ongoing ASEAN–Japan cooperation programmes were developed based on

Japan’s technological and financial resources. However, ASEAN has transformed
over the years; for example, although technological and income levels vary greatly
amongst AMS, some may now be more advanced than Japan. Thus, towards the
next stage of ASEAN–Japan economic cooperation, the mind-set surrounding the
cooperation programmes needs to be adjusted. Today, only through collaboration
– not only through Japan’s technological and financial resources – will ASEAN
and Japan achieve the sustainable economic development that they desire
throughout the region.
176
5.3. Trade and Investment
ASEAN has been working to promote free trade within the region, and cross-border
trade has resumed after a period of restrictions on the movement of goods and
people due to the COVID-19 pandemic (ERIA, 2022). Global value chains in the East
Asia Summit region have proven to be strong and resilient during the pandemic;
indeed, ASEAN and Japan confirmed the importance of manufacturing as the
core of the regional economy (Oikawa et al., 2021). Maintaining and strengthening
competitive global value chains and international production networks are critical
for the continued growth of the region after the pandemic. Widespread geopolitical
uncertainties are underscoring the need to pursue further regional integration for
stable and resilient regional growth; ASEAN and Japan should renew their initiatives
to promote the trade agenda set by the Regional Comprehensive Economic
Partnership (RCEP) agreement (ERIA, 2022). Improving trade connectivity was
most recently addressed at the 25th ASEAN–Japan Summit along with deepening
the ASEAN–Japan relationship (ASEAN, 2022a).
The regional trade environment can be improved to avoid customs clearances

becoming bottlenecks for doing business in the region. By promoting trade
liberalisation, businesses can trade more efficiently, which will then facilitate the
distribution of ASEAN–Japanese products in the region. Improving supply chain
resilience is also essential to ensure stable production activities in the region,
especially in the event of disasters, pandemics, or other emerging issues (e.g.
carbon neutrality and human rights). Japanese companies operating overseas
have encouraged procurement reviews and multi-sourcing after the pandemic.
Furthermore, a survey conducted with overseas Japanese companies showed
that more than 60% operating global businesses are considering reorganising
their supply chains soon (JETRO, 2022a).
Despite ASEAN's efforts to enhance connectivity within the region and beyond, the
Chapter 2 survey revealed various trade challenges as follows.
5.3.1. Difficulties in Trading across Borders
More than 40% of companies in AMS could not determine which economic
partnership agreements (EPAs) or free trade agreements (FTAs) would optimise
their trade costs (Figure 5.1). The current system of EPAs and FTAs in ASEAN entails
that companies determine which EPAs or FTAs are optimal and then declare their
use, based on recommendations from internal or external experts. Multiple EPAs
and FTAs are available, resulting in confusion.
177
Figure 5.1: Applying Favourable Tariffs through Economic Partnership Agreements
or Free Trade Agreements
LOW MEDIUM HIGH
Singapore (n=36) 27.8% 13.9% 11.1% 52.8%
Malaysia (n=7) 42.9% 28.6% 14.3% 85.7%
Thailand (n=23) 26.1% 39.1% 8.7% 73.9%
Indonesia (n=20) 15.0% 40.0% 15.0% 70.0%
Philipines (n=13) 46.2% 15.4% 15.4% 76.9%
Viet Nam (n=54 ) 31.5% 22.2% 11.1% 64.8%
CLM (n=21 ) 19.0% 9.5% 14.3% 42.9%

Notes: The figure shows the difficulty in trading across borders focussing on one of the answer options (i.e.
‘applying favourable tariffs with complex conditions of various EPAs and FTAs’) and its impact on respondents’
business profits at three levels – ‘low’, ‘medium’, and ‘high’ (excluding ‘never recognised as difficulties or issues’).
Brunei Darussalam is excluded since no responses were obtained. The countries are in the order of gross national
income per capita. (Chapter 2 Q8. Do you have difficulties or issues in trading across borders? If you have those,
please select the impact of each on profits of your business as follows: (1) high, (2) medium, (3) low, and (4) never
recognised as difficulties or issues.)
Source: Authors based on the data collected in the Chapter 2 survey.
All AMS – except for Singapore – strongly agreed that they have encountered
unexpected costs due to the lack of customs operational standards on applying
Harmonized System (HS) codes (Figure 5.2). The customs duty that a company
enters on the form when declaring imports depends on the tariff rate specified for
the HS code of the import. Based on the Chapter 2 survey interviews, however, the
HS code determined at customs clearance sometimes differs from that entered
by the company. The decision of which HS code to apply is ultimately under the
discretion of the customs clearance staff.
178
Figure 5.2: Unexpected Costs Due to the Lack of Customs Operational Standards on
Applying Harmonized System Codes
LOW MEDIUM HIGH
Singapore (n=36) 25.0% 8.3% 11.1% 52.8%
Malaysia (n=7) 57.1% 42.9% 100.0%
Thailand (n=23) 30.4% 30.4% 13.0% 73.9%
Indonesia (n=20) 20.0% 35.0% 30.0% 85.0%
Philipines (n=13) 30.8% 23.1% 23.1% 76.9%
Viet Nam (n=54 ) 25.9% 29.6% 16.7% 72.2%
CLM (n=21 ) 23.8% 19.0% 19.0% 61.9%

‘unexpected cost due to the lack of customs’ operational standards on apply HS codes’) and its impact on
respondents’ business profits at three levels – ‘low’, ‘medium’ and ‘high’ (excluding ‘never recognised as difficulties
or issues’). Brunei Darussalam is excluded since no responses were obtained. The countries are in the order of gross
national income per capita. (Chapter 2 Q8. Do you have difficulties or issues in trading across borders? If you have
those, please select the impact of each on profits of your business as follows: (1) high, (2) medium, (3) low, and (4)
never recognised as difficulties or issues.)
Most AMS – except for Singapore – agreed that corruption or lack of compliance of
customs offices with regulations are factors that make it difficult to identify trade
costs (Figure 5.3).
179
Figure 5.3: Corruption or Lack of Compliance of Customs Officers
LOW MEDIUM HIGH
2.8%
Singapore (n=36) 22.2% 13.9% 52.8%

0.0%
Malaysia (n=7) 85.7% 14.3% 100.0%
Thailand (n=23) 26.1% 43.5% 4.3% 73.9%
Indonesia (n=20) 20.0% 35.0% 15.0% 70.0%
Philipines (n=13) 53.8% 7.7% 23.1% 84.6%
Viet Nam (n=54 ) 24.1% 33.3% 22.2% 79.6%
CLM (n=21 ) 23.8% 19.0% 23.8% 66.7%

‘corruption or lack of compliance of customs officers [e.g. facilitation payment]’) and its impact on respondents’
Brunei Darussalam is excluded since no responses were obtained. The countries are in the order of gross national
income per capita. (Chapter 2 Q8. Do you have difficulties or issues in trading across borders? If you have those,
please select the impact of each on profits of your business as follows: (1) high, (2) medium, (3) low, and (4) never
recognised as difficulties or issues.)
Companies in AMS – again, except for those in Singapore – felt that long lead
times are a challenge for the smooth distribution of goods in the region (Figure
5.4). However, AMS have been working to build national single windows (NSWs),
and their digitalisation is saving time. In addition, NSWs are connected by the
ASEAN Single Window initiative, which was built on the initiative of public agencies
in AMS with assistance from the United States (USAID, 2022).5
5
ASEAN, ASEAN Single Window, https://asean.org/our-communities/economic-community/asean-single-
window/
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Figure 5.4: Time-Consuming Manual or Onsite Procedures Due to Unclear or
Unofficial Customs Procedures
LOW MEDIUM HIGH
Singapore (n=36) 19.4% 16.7% 5.6% 41.7%
Malaysia (n=7) 57.1% 28.6% 14.3% 100.0%
Thailand (n=23) 17.4% 52.2% 4.3% 73.9%
Indonesia (n=20) 15.0% 40.0% 25.0% 80.0%
Philipines (n=13) 23.1% 15.4% 38.5% 76.9%
Viet Nam (n=54 ) 27.8% 20.4% 29.6% 77.8%
CLM (n=21 ) 19.0% 23.8% 28.6% 71.4%

Notes: The figure shows the difficulty in trading across borders focussing on one of the answer options (i.e. ‘time-
consuming manual or on-site procedures due to unclear or unofficial customs procedures’) and its impact on
respondents’ business profits at three levels – ‘low’, ‘medium’, and ‘high’ (excluding ‘never recognised as difficulties
or issues’). Brunei Darussalam is excluded since no responses were obtained. The countries are in the order of gross
national income per capita. (Chapter 2 Q8. Do you have difficulties or issues in trading across borders? If you have
those, please select the impact of each on profits of your business as follows: (1) high, (2) medium, (3) low, and (4)
never recognised as difficulties or issues.)
Although NSWs and the ASEAN Single Window are connected, many companies
still point out the lack of necessary digitisation (Figure 5.5). Indeed, some trade
procedures are still carried out manually, such as the issuance of certificates of
origin.
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Figure 5.5: Time-Consuming Manual or Onsite Procedures Due to Limited Scope of
Electronic Services
LOW MEDIUM HIGH
Singapore (n=36) 30.6% 13.9% 44.4%
Malaysia (n=7) 28.6% 42.9% 28.6% 100.0%
Thailand (n=23) 30.4% 34.8% 17.4% 82.6%
Indonesia (n=20) 30.0% 40.0% 15.0% 85.0%
Philipines (n=13) 15.4% 38.5% 23.1% 76.9%
Viet Nam (n=54 ) 38.9% 20.4% 16.7% 75.9%
CLM (n=21 ) 19.0% 23.8% 28.6% 71.4%

Notes: The figure shows the difficulty in trading across borders focussing on one of the answer options (i.e. ‘time-
consuming manual or on-site procedures due to limited scope of electronic service [e.g. paperwork on procedures
remains]’) and its impact on respondents’ business profits at three levels – ‘low’, ‘medium’, and ‘high’ (excluding
‘never recognised as difficulties or issues’). Brunei Darussalam is excluded since no responses were obtained. The
countries are in the order of gross national income per capita. (Chapter 2 Q8. Do you have difficulties or issues in
trading across borders? If you have those, please select the impact of each on profits of your business as follows:
(1) high, (2) medium, (3) low, and (4) never recognised as difficulties or issues.)
Although AMS do have their own NSWs, electronic issuance of certificates of

origin does not occur throughout the region. As expressed in the Chapter 2 survey
interviews, in some cases, a person must physically visit a customs office to obtain
a copy of a certificate of origin.
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Figure 5.6: Long Lead Time in Trading Due to Unconnected Electronic Services
between Countries
LOW MEDIUM HIGH
Singapore (n=36) 30.6% 13.9% 2.8% 47.2%
Malaysia (n=7) 85.7% 85.7%
Thailand (n=23) 34.8% 30.4% 4.3% 69.9%
Indonesia (n=20) 35.0% 25.0% 25.0% 85.0%
Philipines (n=13) 23.1% 23.1% 7.7% 53.8%
Viet Nam (n=54 ) 37.0% 24.1% 1.9% 63.0%
CLM (n=21 ) 38.1% 23.8% 14.3% 76.2%

Notes: The figure shows the difficulty in trading across borders focussing on one of the answer options (i.e. ‘long
lead time in trading due to unconnected electronic services between countries’) and its impact on respondents’
The countries are in the order of gross national income per capita. (Chapter 2 Q8. Do you have difficulties or issues
in trading across borders? If you have those, please select the impact of each on profits of your business as follows:
(1) high, (2) medium, (3) low, and (4) never recognised as difficulties or issues.)
Although JETRO (2020; 2022b) reported that the COVID-19 pandemic led to the
advancement of multi-sourcing and diversification of supply chains, companies
continue to face challenges regarding the risk of sudden closure of trade contact
points (Figure 5.7). Such closures may occur for a variety of reasons, including the
reduction of personnel in case of emergencies. The issue of closed contact points
remains prevalent across many AMS.
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Figure 5.7: Sudden Customs Shutdown in Disaster or Pandemic
LOW MEDIUM HIGH
Singapore (n=36) 19.4% 16.7% 8.3% 44.4%
Malaysia (n=7) 71.4% 14.3% 14.3% 100.0%
Thailand (n=23) 21.7% 34.8% 17.4% 73.9%
Indonesia (n=20) 25.0% 35.0% 13.0% 75.0%
Philipines (n=13) 38.5% 7.7% 23.1% 69.2%
Viet Nam (n=54 ) 31.5% 18.5% 16.7% 66.7%
CLM (n=21 ) 19.0% 19.0% 23.8% 61.9%

Notes: The figure shows the difficulty in trading across borders focussing on one of the answer options (i.e. ‘sudden
customs shutdown in disaster or pandemic’) and its impact on respondents’ business profits at three levels – ‘low’,
‘medium’, and ‘high’ (excluding ‘never recognised as difficulties or issues’). Brunei Darussalam is excluded since
no responses were obtained. The countries are in the order of gross national income per capita. (Chapter 2 Q8.
Do you have difficulties or issues in trading across borders? If you have those, please select the impact of each on
profits of your business as follows: (1) high, (2) medium, (3) low, and (4) never recognised as difficulties or issues.)
5.3.2. Ineffective Trade Facilitation Agreement
As shown in Chapter 1, the RCEP is comprehensive in its coverage of a wide range

of provisions on trade remedies, e-commerce, government procurement, general
provisions and exceptions, institutional provisions, customs procedures and
trade facilitation, trade in services, temporary movement of persons, investment,
intellectual property, competition, as well as SMEs. The AJCEP, on the other hand,
lacks systematic discussions on trade remedies, e-commerce, government
procurement, and general provisions and exceptions, which has resulted in light
commitments from participating countries (e.g. joint research, cooperation,
exchange of information, or other forms of non-binding assistance). Its non-binding
assistance includes that on customs procedures and trade facilitation (Chapter 2,
Article 22); trade in services (Chapter 6); temporary movement of natural persons
(Chapter 6); investment (Chapter 7); as well as intellectual property, competition,
and SMEs (Chapter 8, Article 53).
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Moreover, complicated and incomprehensive rules of origin have led to low
utilisation rates and weak trade creation effects under the AJCEP. Slow and
complicated customs procedures without sufficient trade facilitation further
exacerbate this situation. Adoption of new technology, such as the application of
information technology for customs procedures and trade facilitation, has also
been slow.
The AJCEP uses outdated information, has outmoded provisions, and features
a dated website. Moreover, there is a lack of provisions regarding critical areas
such as e-commerce, the application of information technology, performance
requirements, competition, ratchet mechanisms, and non-conforming measures.
Another significant limitation is the absence of mechanisms for negotiations across
chapters, which limits its effectiveness. For example, there are no mechanisms for
negotiations between the investment and trade in services chapters. The AJCEP
also lacks appropriate measures to address anti-competitive activities, ensure the
confidentiality of information, and protect consumers. The lack of governmental
bodies tasked with monitoring the progress of and facilitating the resolution of
issues in the AJCEP represents another significant limitation.
5.3.3. Poor Cross-Border Data Flow
As expounded in Chapter 3, ASEAN and Japan have established competitive

international production networks in the region. These networks have been achieved
through the improvement of physical connectivity, including roads, bridges, and
seaports, which has reduced the geographical distance to facilitate cross-border
trade. To further strengthen the competitiveness of these international production
networks, however, enhancing digital connectivity – which is a complement to
physical connectivity – is imperative.
Enhancing digital connectivity goes beyond digital infrastructure, such as

telecommunications. As outlined by Chen (2020), digital connectivity comprises
four distinct factors: data connectivity, logistics to expedite the seamless flow of
goods and services, financial connectivity to facilitate cash flow, and the seamless
integration of cyberspace and physical parts of the e-commerce network. Failure
to meet any of these factors will result in the economy being unable to fully exploit
the benefits of the digital economy.
Of these four factors, data connectivity is the most crucial – yet challenging –
component in the region. A state where data flow freely – with trust – can be
considered a state where data are well-connected. Another formidable obstacle
is thus establishing rules that facilitate the free flow of data with trust (Chen, 2021).
Governing data flows is a fundamental issue that must be addressed to achieve
the goal of free and trustworthy data flow. Within the region, there is no shared
stance on regulating cross-border data flow, and various AMS are progressing at
different rates in terms of domestic rules setting (Chen, 2020).
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5.3.4. The Way Forward
Although ASEAN has been striving to enhance regional connectivity in trading,

companies are still facing various challenges, including high uncertainty in trading
costs and trade lead times, as well as the risk of supply chain disruption due to
sudden customs closure. To address these issues, ASEAN has implemented the
ASEAN Single Window to increase the digitalisation scope of trading procedures,
such as the issuance of certificates of origin and bills of lading. Moreover, private-
sector trading platforms can be leveraged to further expand digitalisation by
connecting with NSWs. Such ongoing initiatives in the region, such as TradeWaltz
in Japan, are expected to improve the efficiency of trade operations, accelerating
trading procedures and enhancing their efficiency. Collaborating with such trading
platforms also can offer companies information on EPAs or FTAs to facilitate
decision-making and on supply chain management functions by providing
available stock information.
Due to the COVID-19 pandemic, companies operating in ASEAN have made some
progress in supply chain resilience, as seen in a study conducted by ERIA (2022a).
A mechanism is needed, however, to ensure that these companies can procure
necessary components at the necessary time. Such a ‘fast-track’ mechanism
would help companies obtain these supplies more quickly – not only in an
emergency but also in normal times. For example, for certain industries where
customs clearance normally takes a substantial period of time, imports and
exports can be permitted within a short period of time for specific purposes. Such
initiatives could support innovation activities in today's fast-changing business
environment as well; they do, however, require careful multilateral considerations
with AMS and Japan.
As discussed in Chapter 3, the complexity of supply chains today is influenced

by three main trends: the increasing diversity of consumers and technological
advancements in the industry, rise in supply chain risks, and emergence of new
social values. These factors require the development of innovative models to
address customer preferences, technological advancements, and risks such
as global pandemics and economic disputes. Furthermore, environmental
regulations, human rights measures, and climate change all impact business
activities, and achieving carbon neutrality will shape future supply chains. To meet
these requirements, companies in the region must comply with green procurement
standards, regulate chemicals in products, and provide human rights protections.
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Supply chain models need to evolve to address these changes, including by
adopting new technologies, creating more transparent and responsible practices,
and developing data-sharing partnerships across the supply chain. Companies
also need to be agile to adapt to these trends and challenges to maintain their
competitive edge.
Digitalising trading procedures can minimise corruption in customs offices by

reducing manual or on-site procedures, lessening opportunities for human
intervention.
The AJCEP should be upgraded to promote trade and investment between ASEAN
and Japan. First, the AJCEP should expand its coverage to include provisions
covered by the RCEP to enhance regional production networks and to improve
competitiveness. Second, the AJCEP should be upgraded to expedite the
development of trade in services and investment by including provisions on
e-commerce, application of information technology, performance requirements,
competition, ratchet mechanisms, and non-conforming measures. Lastly,
establishing the AJCEP Secretariat can provide institutional support to enforce
rules and to monitor implementation to ensure the effective functioning of the
agreement, given the complexity of creating a single, continent-wide market for
goods, services, and investment. An upgraded AJCEP is necessary to address the
challenges faced by the current AJCEP and to promote a digital transformation in
ASEAN and Japan by effectively and efficiently utilising digital technology in trade
liberalisation and facilitation.
Indeed, the Bandar Seri Begawan Roadmap (BSBR), which was endorsed at the
53rd ASEAN Economic Ministers’ Meeting in 2021, aims to leverage ongoing digital
transformation in ASEAN by highlighting key actions from existing initiatives. It
articulates a strong commitment to transforming the region into a leading digital
economy and to prioritise actions that include harnessing technology to jumpstart
the economy, simplifying business processes, promoting access to digital
applications, enhancing the protection of intellectual property rights, capacitating
people on digital technologies, and improving cross-sectoral cooperation and
coordination (ASEAN, 2021a).
While many components of the BSBR are composed of pre-existing ASEAN digital
initiatives, the BSBR also includes a provision for the study and adoption of an
ASEAN digital economy framework agreement, which would be legally binding. Its
implementation represents a significant opportunity to establish common data
governance rules amongst AMS. Japan is also actively cooperating with ASEAN to
enhance the agreement through the sharing of information and knowledge. The
ASEAN digital economy framework agreement can also be incorporated into the
AJCEP in the future.
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5.4. Digital and Innovative Economy
5.4.1. Strengths of ASEAN and Japan
The aftermath of the COVID-19 pandemic necessitates a shift in the creation of

businesses within the ASEAN–Japan region. Certainly, the advent of Industry 4.0 and
its concomitant economic growth require new industrial structures and a response
to digital technology. As a crucial driver for further economic advancement,
innovation activities that employ digital technology can be instrumental.
The integration of digital technology engenders the potential for disruptive

innovation by combining new business models, advanced technologies, and
significant investment in research and development. Digital technology in
innovation facilitates business expansion by securing users in their economy
through first-mover advantages, economies of scale, and network effects. This
phenomenon sometimes results in winner-takes-all advantages, as seen with the
global expansion of mega-ventures such as platform-based businesses from the
United States and China, including Google, Amazon, and Alibaba (Oikawa, 2022).
Existing platform-based businesses do possess first-mover advantages, but
businesses in late-industrialised countries that enter the market at a later stage
can still reap benefits (Oikawa, 2022).
Innovation is defined as the deployment of technologies in the economy (Oikawa,

2022). Innovation in late-industrialised countries is often the deployment of the
technological knowledge accumulated in advanced countries. Latecomers in
late-industrialised countries must thus possess an understanding of local needs
and foster a culture of entrepreneurship to compete effectively; they also need
not accumulate technological knowledge from scratch. Deploying cutting-edge
technologies in late-industrialised countries may facilitate rapid progress, a
phenomenon often referred to as leapfrogging. AMS are particularly well placed
to take advantage of a leapfrogging effect, given their abundant potential for
innovation and development. Businesses operating in these countries should
focus on identifying and capitalising on their unique advantages rather than
being weighed down by perceived disadvantages.
ASEAN–Japan should strive to promote collaborative innovation by leveraging their

unique strengths. ASEAN’s primary strength is its abundant potential markets in
which digital technologies can address various social needs. Therefore, innovation
activities in ASEAN may be characterised as driven by social issues, with the aim
of enhancing daily or business-related convenience by transitioning existing
offline lifestyle-related services to online platforms. This trend is exemplified by
the growing popularity of digital life-related services such as e-commerce, which
witnessed further expansion across ASEAN in the wake of the COVID-19 pandemic.
Notably, the emergence of platforms such as Grab (Singapore), Gojek (Indonesia),
and Sea (Singapore) is indicative of this phenomenon. This trend can also be
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attributed to the underdeveloped hard infrastructure and life-related services in
ASEAN, in contrast to the United States, China, and Europe (IMD, 2022).6 According
to Garcia (2022), a total of 50 ‘unicorn’ companies – that is, start-ups valued at
over $1 billion – have emerged within ASEAN.
The second strength of ASEAN is its high digital penetration. The digital divide in terms
of age and location has been a well-known challenge for ASEAN, but significant
strides have occurred in closing the gaps (Yoshikawa and Anbumozhi, 2022). All
AMS – except the Lao People’s Democratic Republic (Lao PDR) and Myanmar –
have internet penetration rates exceeding 70% (Tobing, 2022) Additionally, Vasey
(2022) highlighted the extensive ownership of smartphones in AMS, which has
fuelled the growth of online shopping and delivery services, especially amongst
the younger generation.
The third strength of ASEAN is its high economic growth potential. ASEAN has
undergone a transformation from a vast production market that was once
considered the world's factory to a colossal consumer market. ASEAN is projected
to become the world's fourth-largest economy by 2030 (Lee, 2022). This growth
potential is supported by the abundant population of the region, especially
amongst the younger generation. Its youth, coupled with a high level of digital
literacy, is expected to drive innovations in ASEAN–Japan to tap into a larger market
of ASEAN and Japan with a huge consumer base. Accordingly, the region also has
the potential to evolve into an innovation hub (ASEAN, 2022b), and Singapore has
taken the lead in attracting foreign enterprises to establish innovation centres
there (Bateman, 2022).
Japan also possesses certain strengths that it can leverage to foster future
innovation collaborations with ASEAN. Its primary strength is its high technological
capabilities. Japan possesses advanced product development capabilities,
particularly in the manufacturing industry, exemplified by its automobile industry.
Its innovation performance is noteworthy, ranking 13 amongst 132 economies in
terms of innovation (WIPO, 2021).7
The second strength of Japan is its industries that are fortified by extensive supply
chains. These supply chains encompass the production of primary and finished
products, as well as a wide range of upstream and downstream production lines
and supporting industries.
6
Singapore ranks 3rd in the world on the World Competitiveness Ranking, with Malaysia 32nd and Thailand 33rd.
The indicators include information and communication technology infrastructure (IMD, 2022).
7
In AMS, Singapore ranked 8th, Malaysia followed at 36th, and Thailand followed at 43rd (WIPO, 2021).
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They present opportunities for collaborative product and services development
across various industries within the ASEAN region.
Japan’s third strength is its high level of trust from ASEAN, which has been
corroborated by a survey conducted by the ASEAN–Japan Business Council,
ASEAN Business Advisory Council, and Japan External Trade Organization in 2022
(JETRO, 2022c). The survey revealed that 90% of respondents in ASEAN perceived
Japanese businesses as dependable partners. Against this backdrop, the 25th
ASEAN–Japan Summit held in 2022 resulted in the agreement to reinforce their
collaboration and partnership. It is anticipated that Japan's trustworthiness within
the ASEAN market will facilitate sustained engagement and cooperation amongst
stakeholders and companies in both markets (ASEAN, 2022a).
5.4.2. Challenges in the Collaboration between ASEAN and Japan
The ASEAN–Japan partnership has also been addressing innovation activities

to some extent, employing a framework of cooperation to drive joint research
through private–public–academia collaborations and related initiatives between
Japanese and ASEAN companies, including start-ups. The regulation and rules
governing innovation activities in ASEAN–Japan, however, must be established
to foster collaboration. It is imperative that the applicable regulations in each
country function efficiently while providing foreign firms access to the market to
participate in innovation activities from the global market.
The safeguarding of intellectual property rights is also vital to innovation activities,

as it impacts the business environment for firms operating overseas. The status
of intellectual property protection throughout ASEAN and Japan varies, with
Singapore and Japan having the most advanced intellectual property protection.
Some AMS still need to accede to international intellectual property treaties.
In addition, some existing domestic regulations preclude the demonstration

or launch of products or services, even if the technology or business model is
innovative. This situation is particularly evident when using cutting-edge
technology in business and specific industries due to regulatory barriers. Therefore,
it is crucial to establish a flexible innovation environment that protects users while
promoting innovation activities within ASEAN and Japan.
To realise innovative economies and societies, ASEAN requires innovation hubs

where entrepreneurial people gather. Smart cities have the potential to play a
crucial role in achieving this objective by driving innovation and improving the
quality of life in urban areas. For smart cities to be successful and sustainable, they
must prioritise the needs and wants of their residents. Therefore, citizen-centric
smart cities, which prioritise resident-focussed urban development, are essential.
However, discussed in Chapter 3, while the global trend in smart cities is moving
towards a people-driven approach that highlights democratic, inclusive, and
190
resident-centred urban development, ASEAN has generally favoured technology-
led urban development.
Considering the relatively limited resources available to ASEAN and Japan when
compared to larger innovation markets such as the United States and China,
ASEAN–Japan cooperation should focus on cultivating innovation that leverages
the unique strengths of both sides. Specifically, ASEAN has demonstrated a
capacity for creating digital services that address social issues, while Japan
boasts high technological capabilities.
To encourage regional cooperation for innovation, regulatory frameworks related

to innovation activities should be implemented. One such initiative could be the
establishment of a unified patent system in ASEAN–Japan to enable companies
in the region to register patents more easily, thereby promoting innovation.
Moreover, regulatory sandboxes should be expanded within the region, allowing
specific industry and technology areas to conduct demonstrations under certain
conditions. This could be accomplished by keeping the application window open
for businesses, without establishing a defined application time. It may be beneficial
to include financial support and business incentives, such as governmental
assistance for market deployment of innovative services. These initiatives can be
implemented in specific industries or technology areas with high demand.
As smart cities involve utilising residents' data, including personal health data,
such data must be handled securely and protected. However, regulations on
personal data protection may pose a barrier to demonstrating cybersecurity
efforts by collaborating with stakeholders who handle personal data in a smart
city. To address this issue, certain demonstration projects can be accepted under
certain conditions to ensure that data are handled correctly and that convenient
services are created while still maintaining data privacy.
As the global trend moves towards people-driven smart cities, it is vital to focus
on democratic, inclusive, and resident-centred urban development in Asia. Japan
is leading the way in this area, prioritising not only liveability but also the well-
being of a diverse range of people through its Society 5.0 concept, a human-
centred and 'super-smart' society that balances economic advancement with
social problem-solving.8 While cities in ASEAN face challenges such as insufficient
response to digitalisation and a need for basic infrastructure development, they
possess unique people-centred social characteristics that make citizen-driven
city planning an attractive prospect.
8
Government of Japan, Cabinet Office, Society 5.0, https://www8.cao.go.jp/cstp/english/society5_0/index.html
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5.5. Sustainable Future
The issue of sustainability has become a concern for both ASEAN and Japan given
the prevalence of disasters, such as earthquakes, prolonged rains, and floods, in
the region. ERIA (2022) forecasted that climate change may cause a significant
reduction of up to 6% in ASEAN's gross domestic product by 2050. AMS such as
Indonesia, Malaysia, and the Philippines, which have limited domestic resources,
may find it challenging to mitigate and to adapt to the impacts of global warming.
As ASEAN and Japan aspire to strengthen their relationship, they must consider
sustainability as one of the main topics of concern for the world. It is essential to
develop a mutually beneficial approach that balances economic development
and sustainability challenges. In the wake of the COVID-19 pandemic, prioritising
sustainability over economic development is not feasible, particularly for less-
developed AMS. Thus, ASEAN–Japan cooperation should align with the international
sustainability agenda while sustaining economic development.
5.5.1. Carbon Neutrality and Circular Economy
As ASEAN and Japan are signatories to the Paris Agreement, they are actively
pursuing low-carbon energy to achieve carbon neutrality, as emphasised in
the Glasgow Climate Pact. The Framework for Circular Economy for the ASEAN
Economic Community (ASEAN, 2021) identifies efficient resources management as
a key priority. Anbumozhi and Kojima (2022) described a circular economy as an
industrial process and business model that seeks to minimise waste and pollution
while maximising the use of natural resources. They argued that optimising
resources through the 3Rs – reduce, reuse, and recycle – is crucial.
The transition to a circular economy presents a unique opportunity for fast-
growing AMS economies to achieve sustainable and inclusive economic growth.
However, the readiness, technology, and know-how to implement circular
economy initiatives vary amongst AMS. Anbumozhi, Ramanathan, and Wyes
(2020) highlighted that Singapore has set ambitious targets of recycling 60% of
household waste by 2025 and achieving a recycling rate of 70% by 2030, while the
Philippines has committed to achieving a waste conversion rate of at least 25%
by 2025.
The classification and proper management of resources is a crucial first step in

promoting the reuse of resources. It is essential to establish a systematic process
to collect waste, process it into recycled products, and distribute recyclable
materials to achieve a circular flow of resources. This requires collaboration
amongst governments, industries, and communities to develop and to implement
effective circular economy policies and strategies.
ASEAN–Japan faces the challenge of balancing the need for a stable domestic
power supply and energy transition while considering the varying levels of
192
economic growth and domestic energy resources encountered throughout the
region. As mentioned previously, he region's economic expansion, especially in
less-developed nations, is expected to make ASEAN–Japan the fourth-largest
economy in the world by 2030, resulting in a surge in energy demand. According
to Handayani et al. (2022), ASEAN's energy demand is projected to triple its 2020
level by 2050, with Indonesia and Viet Nam accounting for 58% of this demand.
Additionally, fossil fuels are predicted to continue to dominate the energy supply
in 2040, accounting for about 70% of the total energy supply (Suwanto, Ienanto,
Suryadi, 2021).
However, AMS have committed to participate in international efforts to decarbonise

the global economy. All are signatories to the United Nations Framework Convention
on Climate Change and the Paris Agreement, and they have submitted their
national determined contributions to reduce greenhouse gas emissions. Several
AMS have also pledged to achieve net-zero carbon emissions by 2050, such
as Cambodia, Indonesia, the Lao PDR, Singapore, Thailand, and Viet Nam. Each
AMS has developed a master plan to address climate change and to achieve its
nationally determined contribution.
A cleaner energy transition in ASEAN–Japan is crucial to meet global decarbonisation

goals. Yet due to the high demand for electricity in the region, an immediate shift
to cleaner energy sources faces challenges. Fossil fuel-fired power generation
that is highly energy-efficient and relatively inexpensive remains a significant
source of electricity production, especially since demand is growing (Handayani
et al., 2021). Thus, a well-balanced mix of fossil fuel-fired power generation and
cleaner energy is necessary to meet the domestic electricity demand. Wahyono,
Ienanto, and Suryadi (2021) suggested that promoting the transition to cleaner
energy should occur through a combination of clean and fossil fuel-fired energy
sources, gradually increasing the weight of clean energy over time. However, the
heterogeneous technological and knowledge capabilities across AMS pose a
challenge in advancing decarbonisation activities (ACE, 2020).
To achieve carbon neutrality by 2050, Japan announced a pledge to have net-zero

greenhouse gas emissions by 2050.9 The country aims to support the adoption
of innovative green technologies through increased international cooperation as
well.
5.5.2. Food and Agriculture
In recent years, the food and agriculture sector has undergone digital
transformation (Kozono, 2022). Digitalisation in this sector has the potential to offer
various benefits, including economic advantages through increased productivity,
9
Government of Japan, METI, Japan’s Roadmap to ‘Beyond-Zero’ Carbon, https://www.meti.go.jp/english/policy/
energy_environment/global_warming/roadmap/index.html
193
cost-effectiveness, and market opportunities; social and cultural benefits through
inclusive communication; and environmental benefits through optimisation
of resources. However, the ASEAN food and agriculture sector faces several
challenges in adopting these digital technologies. The potential for digitalised food
and agricultural production is limited by the lack of knowledge and skills amongst
users, limited internet access for farmers in rural areas, high start-up costs for
procuring digital equipment, high maintenance and data analysis costs, and the
need to explore smart farming in various sub-sectors. Similarly, the potential for
a digitalised food supply chain and finance is limited by ad-hoc approaches to
digital marketing, insufficient resources to comply with traceability requirements,
the need for training on maintaining field records, non-harmonised standards for
traceability, and the need to ensure product origin and quality while preventing
commercial fraud.
The prevalence of undernourishment and moderate or severe food insecurity in

the ASEAN total population has been steadily improving over the last 2 decades
(Kozono, 2020).10 Yet due to the COVID-19 pandemic, food security has deteriorated
in several South-East and East Asian countries.
5.5.3. Inclusive Health Care
As discussed in Chapter 3, ASEAN faces several challenges in its health care

sector. First, there are foundational elements missing, such as internet access and
modernised payment systems. An insufficient health care workforce remains a
critical issue that impedes the effective provision of health care services.
Second, financing is a major concern, including medicine reimbursement, health

care commodity procurement, and health care worker salaries. Sustainable
and efficient financing models are needed to maximise resources, which must
be communicated effectively to the population. Third, health care itself needs
to evolve, with a focus on improving health literacy and well-being initiatives,
which requires a whole-of-government approach. Overcoming the inequities in
accessing quality health care in rural and low-income areas is crucial as well.
Fourth, achieving universal health coverage (UHC) requires a stable, long-term
vision and leadership that remains committed to the cause despite political
uncertainties. Finally, the private sector should support governments in achieving
UHC through PPPs, which necessitate collaboration and transparency throughout
the implementation of key programmes.
10
The prevalence of undernourishment is an estimate of the population whose habitual food consumption does
not provide the required dietary energy levels for a healthy and active life. The prevalence of moderate or severe
food insecurity in the total population is an internationally comparable estimate of the proportion of the population
facing difficulties in accessing food.
194
5.5.4. Sustainable Tourism
The tourism industry is important in ASEAN because it contributes to the region's

economic growth, creates job opportunities, promotes cultural exchange,
and supports local communities and conservation efforts. Tourism needs a
sustainability point of view to ensure that activities do not harm the environment,
culture, and local communities and to ensure long-term economic growth and
benefits.
As discussed in Chapter 3, the ASEAN Economic Community Blueprint 2025 aims

to make South-East Asia a region of unique and sustainable tourism destinations.
Recently, the ASEAN Framework on Sustainable Tourism Development in the Post
COVID-19 Era was launched, outlining five key pillars to maximise efforts to rebuild
the ASEAN tourism sector: sustainable economic growth; social inclusiveness and
poverty reduction; resource efficiency and environmental protection; cultural
values and heritage; and mutual understanding, peace, and security (ASEAN,
2023). Strategic priorities for each pillar include sustainable tourism policies,
quality job creation, low-carbon resource usage, cultural tourism promotion, and
crisis preparedness planning.
5.5.5. Closing the Digital Divide
The significance of closing the digital divide11 amongst micro and SMEs is
widely acknowledged as necessary for inclusive and sustainable growth. The
Comprehensive Asia Development Plan 3.0 (CADP 3.0): Towards Integrated,
Innovative, Inclusive, and Sustainable Economy also highlights the importance of
closing the digital divide to realise inclusive growth in Asia (ERIA, 2022).
ERIA is currently undertaking a survey on the digital divide in response to a request

made by the ASEAN Secretariat, following Japan's proposal to investigate means
of narrowing the digital gap amongst micro and SMEs in the ASEAN region (Hun,
2022). This proposal was presented at the 24th AEM Plus Three Consultation
on 13 September 2021. Although the survey is ongoing, noteworthy findings
have emerged from interviews conducted with digital solutions providers from
companies operating within ASEAN, as well as those from digital solution providers
from China, Japan, and Korea that have a presence in ASEAN. Furthermore, input
from micro and SMEs and AMS governments has also been solicited.
11
The term ‘digital divide’ emerged in the literature around 2000 and was subsequently defined by OECD (2001) as
a disparity in the opportunities for individuals, households, businesses, and geographic areas at varying levels of
socio-economic status to access and utilise information and communication technology (ICT) for a diverse range
of activities. In essence, the digital divide pertains to the gaps in both ICT access and usage. Dewan and Riggins
(2005) emphasised the sequential nature of access and usage, positing that the digital divide engenders two
distinct effects: first-order effects that relate to disparities in access to ICT, and second-order effects that pertain to
inequalities in the capacity to use ICT amongst those who have already secured access. Access to ICT represents
a fundamental prerequisite for its effective use.
195
The first finding suggests that insufficient internet infrastructure and supportive
services persist in more rural and lower-income AMS. A pronounced disparity in ICT
infrastructure between urban and rural areas is evident, with this gap being most
pronounced in lower-income AMS. The availability of ICT infrastructure is a critical
precondition for enabling micro and SME digitalisation and facilitating digital
transformation, thus underscoring the need to address this existing infrastructure
gap.12
The second finding is linked to the financial constraints experienced by micro

and SMEs in the region. Micro and SMEs are encountering challenges in recruiting
proficient ICT personnel, primarily owing to their inability to offer competitive
salaries. Furthermore, lower-income AMS do not provide adequate financial
support to micro and SMEs.13
The third finding highlights the presence of a significant ICT skills gap between
lower- and higher-income AMS, as well as between urban and rural areas. This
gap stems from factors affecting both the business and consumer sides of the
digital divide. On the business side, as previously stated, micro and SMEs frequently
encounter challenges in recruiting skilled ICT experts due to their inability to offer
competitive salaries or attractive career paths. On the consumer side, individuals
residing in lower-income countries or rural areas tend to lack access to digital
tools or the necessary training to effectively utilise them. Consequently, companies
often face obstacles in reaching out to these populations through digital tools.
The fifth finding highlights a critical issue where many micro and SMEs face a lack
of business knowledge, which hinders their ability to articulate their issues and
requirements to providers clearly. This makes it challenging for providers to offer
effective solutions. The finding underscores that merely addressing deficiencies
in ICT knowledge may not be sufficient; addressing gaps in both ICT and business
knowledge also may be necessary. Additionally, micro and SME owners are typically
responsible for making decisions regarding ICT investments. Hence, supporting
them in comprehending the benefits of ICT is crucial.
The last finding suggests that cybersecurity risks are not a significant barrier for
micro and SMEs to adopt digital tools, as they do not perceive it as a priority. While
12
The issue of access to digital technologies is intertwined with the challenge of ICT infrastructure. The utilisation of
digital technologies is contingent upon a company's capacity to modify its business processes and models. Queiroz
and Wamba (2022) highlighted several impediments to digital transformation, such as resistance to change,
communication breakdowns, resource constraints, unrealistic cost projections, legacy systems, insufficient top
management support, inadequate workforce skills, lack of commitment, deficient collaboration, and absence of
a coherent vision. These barriers suggest that to achieve a successful digital transformation, management and
employees across different hierarchical levels must actively engage in the change process and leverage the full
range of internal and external resources at their disposal.
13
In this context, cloud computing services can offer a practical solution, enabling them to access advanced digital
technology without having to make significant investments. These services, which are often provided by third-
party platforms at reasonable prices, have proven especially beneficial in facilitating e-commerce during the
COVID-19 pandemic.
196
some acknowledge the importance of cybersecurity, a significant number do
not view themselves as the primary targets of cyberattacks. Additionally, even if
they perceive the risk, they prioritise investing their budget in sales and marketing
functions to achieve prompt returns. However, it is worth noting that cybersecurity
risks will continue to grow with time, and ignoring them can have detrimental
consequences.
ASEAN and Japan must prioritise the transition to clean energy to meet global
decarbonisation goals. A well-balanced mix of fossil fuel-fired power generation
and clean energy is necessary to meet domestic electricity demand and to
move towards the goal of carbon neutrality. To achieve this, ASEAN's initiatives to
enhance energy connectivity should continue to be promoted within the context of
the current ASEAN Power Grid initiative. Japan, with limited energy resources and
a history of experiencing large-scale power outages due to disasters, can refer to
ASEAN's technologies and know-how in this regard. Furthermore, the introduction
of carbon pricing should be promoted to establish a single and connected market
in the future. The EU's single market initiative can serve as a reference. ASEAN
and Japan may consider the EU Carbon Border Adjustment Mechanism as an
advanced effort from a long-term perspective.
In terms of the circular economy, establishing a sizable market in the region is

necessary to establish a framework for the circulation of resources. As a future
vision for ASEAN–Japan cooperation, expanding the distribution market for recycled
products to the entire ASEAN–Japan region is desirable. The establishment of a
large cross-national distribution market will provide an incentive for companies
and other stakeholders to enter the economy.
To achieve resource circulation within the region, Japan can support some AMS
to establish rules on handling waste by leveraging its historical efforts over the
decades. Recycling certification bodies can also be established throughout the
region to develop the market, with reference to EU certification bodies. As in the
case of the EU, other sustainability initiatives such as peer-to-peer tools can serve
as a mechanism to advance regional initiatives. AMS and Japan can review or
provide input on laws, programmes, and systems based on the experience of
certain personnel in the region that others may not have yet encountered.
To enhance the productivity of the food and agriculture sector in ASEAN,

collaborative efforts between ASEAN and Japan are needed to develop and to
disseminate innovative technologies for resilient and sustainable food and
agriculture systems. Human resources development for officials and stakeholders
engaged in activities towards realising resilient and sustainable agriculture is also
essential.
197
To overcome the challenges in food insecurity, it is necessary to expand the range of
emergency food reserve schemes through collaboration. The recent occurrence of
external shocks, such as the COVID-19 pandemic and the escalation of geopolitical
tensions, have had a profound negative impact on food security globally and
regionally. In this context, the ASEAN Plus Three Emergency Rice Reserve (APTERR)
can play a pivotal role in ensuring regional food security during short-term crises,
particularly in relation to rice supply. The possibility of expanding its scope beyond
rice to include other key crops warrants careful consideration and discussion.
To improve health care coverage rates of the population in ASEAN, ASEAN and
Japan need to prioritise UHC opportunities in AMS, while maintaining administrative
efficiencies and preparing for mandatory premium contributions. This can be
achieved by exploring alternative and more sustainable financing arrangements,
leveraging best practices from abroad and beyond health care. Public–private–
academia collaborations should also be embraced, allowing stakeholders to work
together to tackle non-communicable as well as infectious disease challenges.
Furthermore, consolidated health care data flows across ASEAN need to be built,
allowing stakeholders to work together. To develop the health care workforce, a
long-term strategy needs to be developed, including cross-border, while also
digitalising patient-facing and back-office infrastructure.
By highlighting community-based and people-centred tourism, ASEAN can

achieve sustainable economic growth, particularly at the local level and in rural
areas, while also promoting and preserving the environment and its cultural
heritage. Additionally, Japan can share its experience with ASEAN in promoting
tourism development in the aftermath of disasters, reducing vulnerability to
disasters, and measuring sustainable tourism. Finally, Japan's experience in
establishing appropriate governance structures and monitoring mechanisms to
support sustainable tourism development should be shared with ASEAN.
To ensure that sustainable tourism is explicitly incorporated into ASEAN's agendas,
an action plan for the ASEAN Framework on Sustainable Tourism Development in
the Post COVID-19 Era must be developed. This plan should analyse how tourism
sectors can integrate sustainable initiatives into their agendas and identify
appropriate modalities for cooperation. Comprehensive planning and adequate
resources are necessary for effective implementation.
198
To address the digital divide amongst micro and SMEs, it is imperative to recognise
that beyond the improvement of ICT infrastructure and financial resources,
securing a workforce with both ICT skills and fundamental business knowledge is
necessary. Governments should provide training on business knowledge to micro
and SMEs, and ICT providers should collaborate with governments to support the
digitalisation of micro and SMEs. ASEAN–Japan cooperation should also consider
ways to enhance the knowledge of micro and SMEs to enable their adaptation
to the digital economy. Finally, it is essential to nurture ICT experts who are
knowledgeable about manufacturing, as most ICT professionals prefer working in
services sectors such as ICT solutions, banking, and e-commerce platforms.
5.6. Building a Professional Workforce for the Future
5.6.1. Challenges in the Current Workforce
The onset of Industry 4.0, coupled with the swift development and adoption of
new technologies in various sectors, has led to rapid changes in the business
environment. To sustain the growth of the ASEAN–Japan economy, it is essential to
ensure that the necessary human resources for the Industry 4.0 era are adequately
generated and supplied to the region. This will prevent human resources
bottlenecks from impeding medium- to long-term business growth for enterprises
in the region. Achieving this objective entails improving the intraregional human
resources mobility system, with an emphasis on advanced labour.
The Chapter 2 survey revealed that despite progress made in recent years, AMS
face a dearth of middle management competencies that are vital for achieving
sustainable business expansion over the medium to long term; a misalignment
between the skills demanded by companies and the educational curriculum
and materials provided to students; a lack of inclusive education as a means to
expand the talent pool; and restricted mobility of highly skilled human resources,
which poses a barrier to efficient talent allocation across the region.
According to ERIA (2019), blue-collar workers remain abundant in ASEAN. However,

the emergence of Industry 4.0, with its emphasis on automating and streamlining
simple tasks, is estimated to significantly reduce the need for these workers in
the future (OECD, 2021). As factories increasingly adopt robotics, AI, big data, and
other advanced technologies, this trend is expected to accelerate. This structural
shift will be a major factor shaping the ASEAN market, where manufacturing has
traditionally played a central role (ERIA, 2022). Blue-collar workers must thus
develop unique value propositions that cannot be easily replicated by automation
and cultivate problem-solving skills through appropriate mechanisms (Yue et
al., 2019). Consequently, the significance of white-collar workers who can work
independently, as well as middle managers who oversee automated blue-collar
work, will increase.
199
A shortage of such highly skilled human resources within the region was identified
in the Chapter 2 survey. Respondents have a greater need for white-collar human
resources (Figure 5.8). Notably, respondents designated the category of middle
management responsible for driving business transformation or innovation as
highly problematic.
Figure 5.8: Types of Human Resources Insufficient to Achieve Business Growth
Middle management who drives business

transformation or innovation (e.g. new
business planning and/or development, 17.2% 33.3% 32.8% 83.3%
transforming existing business, business
process improvement)
Middle management who manages

existing business process
20.1% 41.4% 17.8% 79.3%
(e.g. managing quality, cost and/or
deivery)
Non-management white-collar
(e.g. knowledge and/or office workers in 29.3% 31.6% 11.5% 72.4%
charge of daily operations)
Labourers dedicated to manual work (e.g.

25.9% 19.0% 9.2% 54.0%
factory or construction operation)
Notes: Excludes ‘never recognised the lack’. (Chapter 2 Q10. Do the following human resources lack in your company
to achieve medium- or long-term business growth? If so, please indicate to what extent your company lacks for
each human resources as follows: (1) mostly, (2) partially, (3) slightly, and (4) never recognised the lack.)
Source: Figure 2.9 of Chapter 2.
Moreover, regarding the extent of skills shortages amongst middle management

personnel, Figure 5.9 illustrates a uniform dearth of such professionals, with all
AMS displaying a shortfall exceeding 80%, regardless of their level of economic
development.
200
Figure 5.9: Shortages of Skills Required for Middle Management by Country
Singapore (n=36) 30.6% 33.3% 18.3% 82.2%
Malaysia (n=7) 14.3% 42.9% 42.9% 100.0%
Thailand (n=23) 22.6% 40.0% 27.0% 89.6%
Indonesia (n=20) 24.0% 45.0% 24.0% 93.0%
Philipines (n=13) 30.8% 32.3% 30.8% 93.8%
Viet Nam (n=54 ) 20.0% 48.5% 24.4% 93.0%
CLM (n=21 ) 19.0% 33.3% 33.3% 85.7%

Notes: Excludes ‘never recognised the shortage’. Brunei Darussalam is excluded since no responses were obtained.
The countries are in the order of gross national income per capita. (Chapter 2 Q13. Please indicate the degree of
shortage of the following skills required for middle management to drive business transformation or innovation: (1)
mostly, (2) partially, (3) slightly, and (4) never recognised the lack.)
In regard to the scale of the surveyed organisations, Figure 5.10 indicates a greater
degree of concern regarding the matter amongst medium-sized (i.e. 299–500
employees) and large (i.e. exceeding 300 employees) enterprises.
201
Figure 5.10: Shortages of Skills Required for Middle Management by Company Size
Micro 31.9% 30.4% 23.0% 85.2%

(less than 10)
Small
(10 to 49) 28.4% 36.0% 21.2% 85.6%
Medium
(50 to 299) 17.8% 46.4% 30.2% 93.6%
Large (Equal or
more than 300) 16.8% 48.4% 23.0% 83.2%
Notes: Q13. Please indicate the degree of shortage of the following skills required for middle management to drive
business transformation or innovation: (1) mostly, (2) partially, (3) slightly, and (4) never recognised the lack.
The deficiency in competencies amongst middle management personnel is not a

predicament exclusive to developed countries or large companies. It is a challenge
encountered by all enterprises that participated in the survey.
Moreover, in the Chapter 2 survey also queried specific competencies that

were lacking amongst middle managers (Figure 5.11). The majority reported
insufficiencies across all skills categories. Of note, 94.3% of participants identified
‘leadership’ as the most deficient.
202
Figure 5.11: Shortages of Skills Required for Middle Management
(n=174) Slightly Partially Mostly
Leadership (e.g. ability to energize

colleagues or stakeholders, lead the team, 16.1% 46.0% 32.3% 94.3%
Strategy development or business modelling

and planning (e.g. judgment in any business 20.7% 34.5% 35.6% 90.8%
activities)
Business ideation
(e.g. creativity, expertise in digitalized 20.7% 44.8% 23.6% 89.1%
business)
Business or operation improvement

(e.g. improving developed business or 25.3% 40.2% 23.0% 88.5%
operation)
Operation or infrastructure development

(e.g. expertise in business activities including 34.5% 37.4% 14.4% 86.2%
back office)
Note: Chapter 2 Q13. Please indicate the degree of shortage of the following skills required for middle management
to drive business transformation or innovation: (1) mostly, (2) partially, (3) slightly), and (4) never recognised the
lack.
In ASEAN, a disparity exists between the skills demanded by the labour market and
the competencies possessed by the human resources generated by educational
institutions. OECD (2021) reported that companies in ASEAN often encounter
difficulties in procuring suitable human resources, owing to a misalignment
between the candidates' proficiencies and firms' expectations. Empirical
evidence also shows the existence of a skills mismatch between candidates and
employers. The Chapter 2 survey revealed that 82% of respondents acknowledged
a divergence between the skills required by firms and educational curriculum and
materials (Figure 5.12).
203
Figure 5.12: Difficulties in Hiring and Training New Graduates and Professionals
(n=174) LOW MEDIUM HIGH
Gaps between required skill sets

by your company and educational 28.7% 40.2% 13.2% 82.2%
Lack of opportunities for working

professionals to reskill 33.3% 35.6% 11.5% 80.5%
Lack of work experience for students to

sublimate their knowledge to practical 34.5% 32.8% 8.0% 75.3%
work (e.g. internships)
Lack of experienced engineers to train

students into potential skilled workers 27.0% 32.2% 12.2% 71.3%
lnabiity to hire skilled foreign workers

due to strict requirement for visas or 31.6% 25.3% 10.9% 67.8%
work permits
Cultural or geographical barriers to

access job information for workers (e.g. 42.5% 19.5% 5.7% 67.8%
gender or reigious barriers)
Lack of accessibiity of formal education to obtain

25.3% 24.1% 9.8% 59.2%
necessary knowledge for work (e.g. primary, mid,
or higher education)
Notes: Excludes ‘never recognised as difficulties or issues’. (Chapter 2 Q11. Do you have difficulties or issues in hiring
or training new graduates and professionals? Please select the impact of each on profits of your business as
follows: (1) mostly, (2) partially, (3) slightly, and (4) never recognised the lack.)
Consequently, some companies find it necessary to retrain newly hired employees.

New graduates are frequently not equipped with the skills necessary to excel in
the workplace, necessitating the implementation of a comprehensive training
programme upon their hiring. Such programmes typically include both off-the-
job training, which takes place in a classroom setting, and on-the-job training.
Nonetheless, the proportion of companies providing such needed training to their
employees in South-East Asia remains relatively low (OECD, 2021).
204
Figure 5.13: Training Provision by Employers
% of firms offering format training
70
60
50
40
30
20
10
0
Myanmar Indonesia Thailand Malaysia Cambodia Viet Nam Lao PDR OECD East Asia Philippines
average and Pacific
Lao PDR = Lao People’s Democratic Republic, OECD = Organisation for Economic Co-operation and Development.
Source: OECD (2021).
Indeed, only the Philippines surpasses the OECD average in providing necessary
training by employers (Figure 5.13). Other AMS fall below due to a range of factors,
including lack of capacity to inadequate training for trainers. Despite the regulatory
requirement for companies to provide training to their employees, many firms
struggle to establish effective training programmes. The Chapter 2 survey results
demonstrated that firms often seek to translate students' academic knowledge
into practical skills through internships and other job-related opportunities (Figure
5.12).
A significant proportion of firms surveyed (75%) also identified the ‘lack of work
experience for students to apply their theoretical knowledge in practical settings
(e.g. internships)’ as a major concern. In addition, a substantial number of firms
(80%) recognised the importance of reskilling opportunities for their employees
to enhance their professional competencies. Nonetheless, the implementation of
training programmes posed challenges for firms in need of them. About 71% of the
surveyed firms cited the ‘insufficiency of experienced engineers to train students
into potential skilled workers’ as a key obstacle.
The industrial sector is currently striving to adapt to the dynamic landscape

of Industry 4.0, undertaking various business transformation endeavours and
205
initiatives. It follows that the educational sector must also respond to these
changes in kind. The promotion of demand-driven employment within higher
education and technical and vocation education and training (TVET) assume
critical significance.
A majority of Chapter 2 survey respondents identified the lack of access to formal

education to obtain necessary knowledge for work as a difficulty in recruiting and
training new graduates and professionals. This finding underscores the prevalence
of exclusion from the inclusive education network amongst a significant proportion
of the ASEAN population, while also signalling the recognition by some firms of
the critical role played by inclusive education networks in enhancing workforce
development.
Inclusive educational opportunities are crucial in preparing human resources

for prospective white-collar or middle-management positions, particularly in
Cambodia, Lao PDR, and Myanmar (ASEAN, 2020). Therefore, prioritising inclusive
educational practices can yield favourable outcomes in the region's socio-
economic development.
Intraregional business integration can be deepened through the implementation
of policies that facilitate the freer movement of skilled workers, as posited by Yue
et al. (2019). Indeed, a significant proportion of Chapter 2 survey respondents
(68%) reported being unable to hire skilled foreign workers due to onerous visa
and work permit requirements.
To develop advanced skilled workers in the region, it is essential to define common

skill sets for human resources between ASEAN and Japan. These skill sets should
include both digital and business skills. Ideally, these skill sets would be offered
through e-learning or integrated into relevant educational programmes to ensure
consistency between education and employment, thereby bridging the skills
mismatch between human resources and industries.
Moreover, the ASEAN–Japan partnership should focus on inclusive education

to ensure efficient human resources mobilisation in the labour market. This can
be achieved by developing hard infrastructure, such as broadband networks;
providing smartphones and tablets to guarantee conducive learning environments;
and facilitating educational opportunities through PPPs, especially education
technology companies offering advanced educational programmes.
The mutual recognition of professional qualifications should also be promoted

throughout the region, and the scope of the occupational areas to be covered
between ASEAN and Japan should be expanded. Additionally, mutual recognition
of credentials could be supported by increasing the number of schools eligible for
credit transfer, ensuring the quality of professional qualifications.
206
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CHAPTER 6
Recommendations for the ASEAN–Japan

Economic Partnership for a Sustainable

and East Asia
In light of the 50th anniversary of Association of Southeast Asian Nations (ASEAN)–

Japan friendship and cooperation in 2023, the following measures are proposed
to strengthen future ASEAN–Japan cooperation. Although they range from easily
implementable to more arduous, these policy recommendations provide a clear,
decisive path for ASEAN and Japan to collaborate in the future.
6.1. Promote Trade and Investment

6.1.1. Deepen ASEAN–Japan Economic Integration
6.1.1.1. Upgrade the ASEAN–Japan Comprehensive Economic Partnership
One way to promote trade and investment amongst ASEAN and Japan is to
upgrade the ASEAN–Japan Comprehensive Economic Partnership (AJCEP). As
stated in Chapter 1, this can occur through the following three actions.
First, the AJCEP should expand its coverage to include provisions of the Regional
Comprehensive Economic Partnership (RCEP) agreement to maximise the
benefits of both agreements. The comprehensive provisions of the RCEP aim to
enhance regional production networks and to improve competitiveness, while
the mechanisms of the AJCEP – such as higher tariff concession rates and the
creation of sub-committees for sanitary and phytosanitary standards and
technical barriers to trade – aim to facilitate trade liberalisation and develop
the capacity of ASEAN Member States (AMS). By ensuring compatibility between
the two agreements, ASEAN and Japan can strengthen their competitiveness of
production networks through their deep economic integration.
Second, the AJCEP should be upgraded to expedite the development of trade

in services, investment, and other provisions between ASEAN and Japan. The
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AJCEP currently lacks provisions on e-commerce, the application of information
technology, performance requirements, competition, ratchet mechanisms, and
non-conforming measures. It also lacks mechanisms for negotiations across
chapters, such as the investment chapter and trade-in-services chapter. Further,
the AJCEP does not have appropriate measures against anti-competitive
activities, the confidentiality of information, and consumer protection. Addressing
the lack of ideal provision, the AJCEP should promote a digital transformation in
ASEAN and Japan and effectively and efficiently utilise digital technology in trade
liberalisation and facilitation.
Lastly, establishing the AJCEP Secretariat should be considered. Given the

complexity of creating a single, continent-wide market for goods, services, and
investment, the establishment of the AJCEP Secretariat would provide institutional
support to enforce rules and to monitor implementation of the agreement.
6.1.1.2. Equip Companies with Relevant Information on Economic Partnership

Agreements and Free Trade Agreements
As observed in the Chapter 2 survey, optimising the application of complex

economic partnership agreements (EPAs) and free trade agreements (FTAs) can
contribute significantly to improving the ease of doing business for companies.
Presently, the application of EPAs or FTAs is at the sole discretion of companies
throughout ASEAN. According to JETRO (2022), only around 60% of Japanese
companies importing and exporting in ASEAN have used EPAs or FTAs, and some
did state that they do not utilise them due to ‘not knowing the schemes and
procedures (37.1%)’ and ‘[being] not sure the goods can be applied [under] the
scheme (31.9%)’. The same survey showed that some businesses cannot decide
on the application of EPAs or FTAs; they eventually fail to apply for any of them.
A mechanism should thus be introduced to enable companies to optimise

trade costs using EPAs or FTAs. As in Japan, providing a consultation service
for businesses on this subject would be useful.1 It would also be convenient if
application decisions could be made automatically. The use of private-sector
trading platforms in determining which EPAs or FTAs are applicable can also be
considered, although such cases have not yet been observed.
6.1.1.3. Introduce Fast-Track Trading Schemes under Certain Conditions
ASEAN and Japan should introduce a multinational fast-track trading scheme

to expedite customs clearance procedures for specific goods under certain
conditions. This would benefit intraregional economic activities in two ways.
1
For example, the Japan External Trade Organization (JETRO) consults on EPAs for Japanese companies located
overseas. See JETRO Malaysia, Our Services, https://www.jetro.go.jp/malaysia/services.html
212
The first benefit would be the rapid supply of goods in emergencies. As in the
European Union (EU), consideration in ASEAN and Japan should be given to items
of extreme urgency, including drugs and daily life support supplies, due to the
region’s proclivity towards disasters. A study should be conducted, focussing
on goods that should be considered in accordance with the existing customs
clearance rules in each country.
The second benefit is for the stimulation of business activity in specific industries.
Indeed, the fast-track mechanism does not have to be an initiative that applies
only to emergency relief supplies; it can also help distribute components and
goods in specific industries to support substantial industrial development. As
indicated in the Chapter 2 survey, some respondents pointed out the long lead
times for customs clearance for various parts and goods. The implementation of
an ASEAN–Japan fast track for goods to specific industries and technology areas
where business needs are high could encourage rapid research and development
in the region. Such an initiative within ASEAN–Japan could foster specific industries
and technology areas throughout the region, improving the doing business
environment and enhancing the region’s attractiveness as an environment for
creating innovation. Early development of successful cases will make it easier to
expand to other areas of interest and to implement fact tracks multilaterally.
6.1.1.4. Accelerate Efforts to Prevent Corruption amongst Customs Officials
According to the Chapter 2 survey, companies conducting business in various AMS

continue to be concerned about corruption, particularly facilitation payments.
ASEAN and Japan should thus promote initiatives to improve customs compliance
in each country to combat corruption. This can be done by developing anti-
corruption manuals and training programmes to raise awareness of corruption
amongst customs officials.
Corruption is facilitated by human intervention in trade operations. Corruption will

fall, therefore, by minimising face-to-face interactions. Expanding the electronic
scope of national single windows (NSWs) and strengthening connectivity with
private-sector trading platforms are therefore effective anti-corruption measures,
as they promote the digitalisation of a series of trade operations. Efforts towards
digitalisation should thus be encouraged.
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6.1.2. Strengthen Supply Chain Resilience
6.1.2.1 Build a Data Supply Chain Ecosystem to Strengthen Competitiveness of

International Production Networks
As discussed in Chapter 3, three trends effect supply chains: the rising diversity
of consumers and technological advancement of industry, growing supply chain
risks, and emerging social values. These trends are leading to more complex
supply chains that require distinct models to address customer preferences,
technological advancements, and risks such as global pandemics and disputes
between economic giants. Moreover, environmental regulations, human rights
measures, and climate change now impact business activities, and achieving
carbon neutrality will shape future supply chains. Companies are now required
to comply with green procurement standards, human rights protections, and
regulations on chemicals contained in products.
To establish a competitive digital supply chain ecosystem in ASEAN, the Economic

Research Institute for ASEAN and East Asia (ERIA) initiated a project on the digital
supply chain ecosystem in ASEAN and Japan by convening a study group of
experts from business associations and academia. Without efficient data sharing,
companies cannot understand what is happening in emergencies, such as
disasters and pandemics, and cannot meet global requirements on sustainability
and human rights issues. Companies need to participate in these discussions on
data sharing, the benefits of sharing data, and how it can create more competitive
business operations. Governments also need to be included, as supply chains are
international. ASEAN and Japan should thus seek to build a data supply chain
ecosystem to efficiently respond to these supply chain shifts and to maintain their
competitiveness.
6.1.2.2. Expand the Scope of Digitisation of the Intraregional Trading System
The initiative to expand the scope of digitised operations in NSWs is ongoing,

and the ASEAN Single Window – to which NSWs are connected – should also be
continued. The connectivity between the ASEAN Single Window and Japan must
be enhanced for the trading environment within the region, as the complete online
processing of bills of lading and certificates of origin falls under this link.
In particular, the electronic exchange of certificates of origin, which has been

successfully demonstrated between Japan (TradeWaltz) and Thailand (National
Digital Trade Platform), is improving the ease of ASEAN–Japan trade customs
clearance operations. Thus, system connectivity amongst the ASEAN Single
Window, NSWs, and Japan through private-sector trading platforms should be
encouraged. It is important to promote intracountry and multilateral digitisation
using the same protocols and with the necessary financial assistance and human
resources.
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6.1.2.3. Provide Information on Alternative Sources of Parts and Materials for Supply
Chain Resilience
As the Chapter 2 survey indicated, supply chain disruptions are a concern for
companies. It is desirable to have a network domestically or internationally that
allows for alternative sources of materials and inventory supply if the typical
supply chain is shut down in an emergency. A supply chain will be more resilient if
it can better manage the domestic shortage of commodities and distribute them
to the businesses that require them when needed.
Advanced technologies (e.g. blockchain) can help achieve a resilient supply chain.
TradeWaltz’s supply chain management functions are backed by blockchain as
a core technology. Those functions enable user companies to track their trading
items. TradeWaltz (2021) announced its successful real-time tracking of package
delivery status; the private-sector trading platform can provide faster, more
accurate information on the location of cargo both domestically and internationally.
As the number of users of this platform increases, the scope of visibility of the
inventory situation in Japan will expand. It may be thus possible to minimise the
impact of supply chain disruptions by using such inventory information, even in
the event of customs closures in an emergency.
As stated previously, the linkage between private-sector trading platforms

and NSWs is ongoing (i.e. Japan and Thailand). In addition to promoting NSW
operations, necessary knowledge should be transferred on the implementation of
these private-sector trading platforms in AMS.
6.2. Encourage a Digital and Innovative Economy
6.2.1. Promote Start-ups
6.2.1.1. Build an ASEAN–Japan-Wide Entrepreneurial Ecosystem
To achieve sustainable growth, innovative activities and entrepreneurship in both

ASEAN and Japan must be fostered. The concept of innovation encompasses
two phases: the production of scientific knowledge or technology, followed by
its deployment. ASEAN and Japan possess complementary strengths in terms
of innovation. According to Kimura and Oikawa (2022), Japan has accumulated
significant research and development stock, while ASEAN boasts an energetic
entrepreneurship culture based on its abundant young population. Collaborative
efforts between ASEAN and Japan, therefore, can facilitate sustainable growth in
both economies.
According to Rosiello, Vidmar, and Ajmone Marsan (2022), several factors are
necessary for a thriving entrepreneurial ecosystem. Access to markets for new
goods and services is vital, with geographic location or positioning within global
value chains affecting access to buyers. Networks of entrepreneurs enable
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knowledge, skills, and capital to flow, while leadership provides vision and role
models, requiring engagement from serial entrepreneurs committed to their
local areas. Access to finance – preferably from investors with entrepreneurial
knowledge – ensures investments in uncertain and long-term business projects.
Finally, diverse and synergetic human resources, including well-functioning
universities, can serve as significant sources of new spin-offs that support
ecosystem development. ERIA established the new Centre for Digital Innovation
and Sustainable Economy to serve as a platform for start-ups and other relevant
stakeholders, both virtually (e.g. knowledge centre) and physically (e.g. co-
working space). This centre can serve as a catalyst for the development of an
ASEAN–Japan-wide entrepreneurial ecosystem.
6.2.2. Encourage Innovative Smart Cities
6.2.2.1. Promote Citizen-Driven Smart Cities
ASEAN needs an innovation hub to promote economic development and to

compete globally. Smart cities can play a role, as they can drive innovation.
Innovation is not solely driven by technology but also by people. To ensure that
smart cities are successful and sustainable, they must prioritise the needs and
desires of their residents who want access to good urban amenities and a better
place to live and work; therefore, citizen-driven smart cities, which emphasise
resident-centred urban development, are crucial.
As the global trend is shifting towards people-driven smart cities, it is essential to

focus on democratic, inclusive, and resident-centred urban development in Asia.
Japan is already making advanced efforts towards this goal, prioritising liveability
and well-being through its Society 5.0 concept, a human-centered, 'super-smart'
society that balances economic advancement with social problem-solving.2
Although cities in ASEAN face various challenges – such as insufficient responses
to digitalisation and basic infrastructure development – they do possess unique,
people-centred social characteristics that increase interest in citizen-driven city
planning.
ERIA, in collaboration with Kyoto University and various universities in AMS, organised
the Asian Inclusive Smart Cities conference. There, it is crucial to showcase city
planning projects that respect Asian values, involve the business community, and
develop new city evaluation indicators and standardisation to realise democratic,
inclusive, and resident-centred urban development unique to Asia.
2
Government of Japan, Cabinet Office, Society 5.0, https://www8.cao.go.jp/cstp/english/society5_0/index.html
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6.2.3. Secure Intellectual Property Rights
6.2.3.1. Introduce a Unified Scheme to Enable Intellectual Property Protection
A unified ASEAN–Japan scheme for intellectual property protection should be

introduced to ensure that innovative technologies and products created by
companies and research institutes are protected wherever they are developed in
the region. The EU system example, in which a standard patent application is filed
and examined by a common patent office in the region, should be emulated. The
single European patent system, scheduled to be introduced in 2023, is another
form of intellectual property rights integration that ASEAN should model.
In addition, the intellectual property application process should be operated

online as much as possible. The application platform should be accessible to
applicants located in AMS as well as Japan. Developed AMS can take the lead
in establishing such a scheme by leveraging their deep and wide knowledge of
intellectual property right schemes, which has been attractive to foreign entities.
The patent examination process in AMS should also be sped up. Japan already
provides support for the dispatch of human resources to improve patent
examination in some AMS (e.g. Indonesia and Viet Nam). Similarly, countries with
knowledge should provide assistance to less-developed countries where patent
examination work is still in its infancy. Japan and Singapore can advise on how new
technologies, products, and services should be subjected to patent examination
in accordance with local patent rules.
6.2.4. Ensure Regulatory Reform
6.2.4.1. Introduce a Regulatory Sandbox System
ASEAN–Japan regulatory sandboxes should be promoted to prevent current

regulations from hindering business creation for innovation activities in the
region. By introducing regulatory sandboxes, regulatory authorities can authorise
the demonstration of new technologies to entities in a particular case. Based on
the output of the demonstration, regulators can decide whether to implement
regulatory reform in each country.
217
As in Singapore, a regulatory sandbox can be pursued first in each AMS to
encourage innovation activities. Global entities can participate in demonstration
projects from outside of the AMS in which the demonstration site is located to
welcome innovative ideas and other resources with diversified backgrounds. For
example, a consortium involving companies and parties from multiple countries
could be required for demonstration projects so that foreign-affiliated enterprises
with innovative and challenging technologies can be involved.
As in Spain, AMS should consider implementing pilot projects in which the content
demonstrated in a specific country can lead to regulatory reform throughout ASEAN.
The establishment of such a demonstration scheme and support for regulatory
reform after the demonstration can be supported by developed countries. It is
also important to build a scheme enhancing information sharing regarding the
results of these regulatory sandboxes.
6.3. Aim for a Sustainable Future
6.3.1. Support Carbon Neutrality
6.3.1.1. Prioritise Technology Development, Demonstration, and Supply Chain

Creation towards Carbon Neutrality
To achieve carbon neutrality in ASEAN, policymakers must prioritise technology

development, demonstration, and supply chain creation towards this goal.
Given the diverse economic development levels amongst AMS and their need for
affordable electricity to support further growth, policymakers should also consider
a mix of fossil fuel-fired power generation and clean energy options.
Recent research, such as Kimura et al. (2022), highlighted the importance of

utilising various low-carbon technologies – including combined-cycle gas
turbine; coal and ammonia co-combustion; gas and hydrogen co-combustion;
storage batteries; and carbon capture, utilisation, and storage – in addition to
renewable energy installations throughout the region. However, the cost of these
technologies is currently high for ASEAN, which has limited funds to invest in
them. Therefore, policymakers must identify more cost-effective technologies by
prioritising investments in technologies that have lower costs, higher efficiency,
and greater scalability. By doing so, policymakers would ensure that the transition
to a carbon-neutral economy in ASEAN is both feasible and financially sustainable.
Japan needs to develop and to demonstrate these technologies; it had one of the
highest number of renewable energy patents in the world from 2015 to 2020.3 As
3
According to Statista, of the top 100 companies that filed the green patents between 2015 and 2020, those in Japan
accounted for the largest share, at more than 30%. See Statista, Distribution of Green Patent Filings Worldwide as
of 2020, by Select Country, https://www.statista.com/statistics/859805/share-green-patent-filings-globally-by-
country/ (accessed 1 May 2023).
218
part of Japan's vision of an Asia Zero Emission Community, Japan plans to develop
more energy transition technologies, including carbon capture, utilisation, and
storage, in cooperation with AMS. By promoting these technologies, it is contributing
to an environmentally friendly Asia while gaining new business opportunities. For
example, Japanese companies are involved in carbon capture, utilisation, and
storage projects in Australia, which aims to provide 50% of the co-firing energy of
coal-fired power plants with ammonia by 2028 (Nemoto, 2022). Such a technology
should be used help promote the energy transition in ASEAN.
Additionally, ASEAN and Japan must work collaboratively to promote the

development of supply chains that establish the foundation for the energy transition
as well as cost savings. By prioritising technology development, demonstration,
and supply chain development, ASEAN can move closer to achieving its goal of
carbon neutrality.
6.3.1.2. Promote Financial Support for Energy Transition Technologies
The current green taxonomy being developed in the EU and Singapore focusses
mainly on green technologies, leaving out some of the phased transition
technologies that AMS still require, such as ammonia co-firing. To ensure that the
necessary technologies for ASEAN's energy transition are appropriately funded, a
common taxonomy should be established for ASEAN.
The Asia Transition Finance Study Group (2022) published the first version of the
taxonomy, and ERIA (2022) also released a transition finance technology list. To
facilitate transition finance in Asia, however, these documents must be updated
regularly, and stakeholder relationships should be expanded and strengthened.
By establishing a common taxonomy, ASEAN can effectively fund and implement
the necessary technologies for its energy transition.
6.3.1.3. Improve Energy Efficiency and Connectivity
Improving energy efficiency and enhancing energy connectivity are crucial steps
for ASEAN to achieve its energy transition goals. In terms of energy efficiency, there
is much potential for improvement in ASEAN, particularly in the industrial, transport,
and construction sectors. However, there is a shortage of experts capable of
developing and managing energy efficiency projects. Therefore, continuous
support for capacity building is essential to spread energy efficiency and savings
knowledge and skills throughout ASEAN, such as through the ASEAN–Japan Energy
Efficiency Partnership.
Enhancing energy connectivity through regional cooperation, such as through the

ASEAN Power Grid (APG), is also key to optimising electricity through the efficient
219
use of low-carbon technologies, including renewables. The APG offers numerous
benefits, including heightening investments on a regional scale, balancing
excess supply and demand, and accelerating the development and deployment
of renewable power generation. To realise the APG, ASEAN needs to engage in
continuous discussions from a long-term perspective while involving countries with
relevant expertise, such as Japan, those in Europe, and the United States. However,
realising the APG requires resolving complex issues such as building consensus
amongst stakeholders, establishing a power trading institution, designing a power
market, and developing the necessary infrastructure. To this end, ERIA has made
recommendations for a multilateral power trading institution and a road map for
its establishment, which should be pursued (Noord Pool Consulting, 2018).
Japan would also benefit from the APG, as the efficient supply of renewable energy
through the grid would enable many Japanese companies in ASEAN to conduct
their business activities using green energy, enhancing their social reliability and
brand. In addition, the ability to connect large amounts of renewable energy to
the grid would create more opportunities for Japanese companies to penetrate
ASEAN as power producers.
6.3.1.4. Introduce Emissions Trading Schemes
Consideration should be given to establishing an intraregional emissions trading

scheme between ASEAN and Japan that would allow carbon dioxide emissions to
be traded between companies, thereby achieving regional harmonisation. First,
AMS should consider introducing emissions trading schemes within their own
countries. It would be effective to transfer the knowledge of Japan, which is already
conducting demonstration experiments in its domestic market. In addition, they
should form common rules for the future harmonisation of such schemes.
Then, ASEAN and Japan – which has had difficulty establishing a huge market on
its own like China – should aim to create an integrated market like that of the EU.
International standards and best practices should be adopted as a preliminary
basis for further communication and cooperation. Furthermore, a fund could be
established between ASEAN and Japan to support the establishment of a carbon
trading market in AMS by promoting it as a regional initiative. Indeed, ASEAN and
Japan should deepen the dialogue on the development of carbon trading markets
and establish a common language for all countries to design market mechanisms
(Liu and Nedopil Wang, 2021).
220
6.3.1.5. Promote Carbon Credit Initiatives
Japan announced its bilateral carbon credit efforts, which have been operating
since November 2022, as an international initiative. In addition to the four AMS
that are already taking part, it is hoped that Japan will promote cooperation with
the six other AMS in the future. By making these bilateral carbon credit initiatives
an international standard, further promotion of ASEAN–Japan initiatives can be
expected.
6.3.2. Foster a Circular Economy
6.3.2.1. Provide Technology and Know-How Related to Resources Recovery and

Reuse
The adoption of EU-type uniform rules can facilitate resources recovery and reuse
initiatives in the region in a single step. The progress of such initiatives varies
amongst AMS, underscoring the importance of supporting institutional design
and operation specific to each country. In this regard, Japan's technology and
knowledge in resources recovery and reuse, refined through years of rules-making
and operational experience, can be instrumental.
Effective waste collection rules and their proper implementation are imperative.
The design of such rules should be predicated on the principles of extended
producer responsibility (EPR) practiced by the EU, Japan, and other nations.
With the growing concern over marine plastics, many developing countries are
exploring the adoption of EPR for packaging and container waste (Johannes et
al., 2021). In this context, Japan's experience with the Containers and Packaging
Plastics Law could provide valuable insights to ASEAN.
Governments should formulate strategies for expanding waste collection and

ensuring sound waste disposal (Johannes et al., 2021). Defining the roles and
responsibilities of the entities involved in the recycling process, as seen in Japan's
laws and regulations, can prove effective in AMS.
6.3.2.2. Develop a More Efficient System for Distributing Recycled Products
To promote the widespread use of recycled products, industry standards should

be established between ASEAN and Japan. To foster the participation of private
companies and other stakeholders, an integrated market should be established
that spans across borders. When devising product and service standards,
established standards from the EU, other countries, and relevant international
organisations should be referenced. Additionally, these standards must be readily
applicable to all businesses to create a larger market and to attract more private
sector participants.
221
6.3.3. Reform the Food and Agriculture Sector
6.3.3.1. Prioritise Dissemination of Innovative Technologies and Human Resources

for Resilient Food and Agriculture Systems
To realise a resilient and sustainable agriculture and food system throughout

ASEAN, innovative technologies should be developed and disseminated between
ASEAN and Japan. Ongoing projects, such as Greenhouse Gas Mitigation in
Irrigated Rice System in Asia (MIRSA), Accelerating Application of Agricultural
Technologies for Resilient and Sustainable Agriculture and Food System in the Asia
Monsoon Region, and Smart Agriculture Pilot Project, are expected to facilitate the
dissemination of innovative technologies and be scaled up in the future. However,
as each AMS’s priorities, policies, and technical circumstances for application of
innovative technologies differ, it is important to note that there are no ‘one-size-
fits-all’ solution.
Human resources development for officials and stakeholders engaged in resilient

and sustainable agriculture is also essential. Ongoing projects such as the
Capacity Building Project for Farmer's Organizations to Support the Development
of Food Value Chains in ASEAN Countries, Human Resource Development Project
in Food-Related Areas through Partnership Program with Universities in ASEAN
Region, and Project for Enhancing the Understanding of Good Agricultural Practices
by Japan-ASEAN Partnership are capacity-building projects featuring ASEAN–
Japan cooperation. These projects have already trained many ASEAN officials and
stakeholders, have been highly evaluated by AMS, and should continue.
6.3.3.2. Facilitate ASEAN Regional Guidelines for Sustainable Agriculture in ASEAN
ASEAN and Japan should intensify their partnership to facilitate the implementation
of the ASEAN Regional Guidelines for Sustainable Agriculture in ASEAN (ASEAN,
2022). The Japan International Research Center for Agricultural Science recently
launched the Green Asia initiative to support the realisation of these guidelines,
which includes disseminating knowledge on basic agricultural technologies and
sustainable practices in the Asia Monsoon region. The active involvement of
AMS is strongly recommended. Moreover, ERIA initiated a research project that
aims to enhance sustainable agriculture and food systems in AMS with support
from Japan. This project includes a scoping study that identifies key sustainable
priorities and strategies for agriculture and food systems in each AMS, as well
as assesses each country's readiness in implementing the guidelines. Reporting
the outcomes of these projects to the relevant ASEAN sectoral body is crucial to
realise the guidelines, including formulating action plans for their implementation.
222
6.3.3.3. Expand the Scope of the ASEAN Plus Three Emergency Rice Reserve
The recent occurrence of external shocks, such as the COVID-19 pandemic and the
escalation of geopolitical tensions, have had a negative impact on food security
globally and regionally. This, in turn, has led to an unprecedented increase in food
prices. In this context, the ASEAN Plus Three Emergency Rice Reserve (APTERR)
can play a pivotal role in ensuring regional food security during short-term
crises, particularly in relation to rice supply. As stated in Chapter 3, the APTERR
has recently released 7,138 metric tonnes of rice from Japan and the Republic
of Korea to mitigate emergency situations, including the COVID-19 pandemic,
in Cambodia, Lao People’s Democratic Republic, Myanmar, and the Philippines.
Given the APTERR’s success in addressing these short-term crises, the possibility of
expanding its scope beyond rice to include other key crops warrants consideration.
6.3.3.4. Establish a New Framework for Food and Agriculture Cooperation
Given the increasing number and diversity of ASEAN–Japan cooperation projects,

a new framework should be established for the ASEAN Plus Japan Ministers on
Agriculture and Forestry (AMAF+Japan) to further enhance food and agriculture
cooperation, in addition to the existing ASEAN Plus Three Ministers on Agriculture
and Forestry (AMAF+3) framework. This is particularly relevant as ASEAN–Japan
cooperation approaches its 50th anniversary; therefore, the first meeting of
AMAF+Japan should be held during this year to commemorate the occasion.
6.3.4. Increase Inclusive Health Care
6.3.4.1. Evolve Universal Health Coverage Schemes
ASEAN and Japan should collaborate to evolve their universal health coverage
(UHC) schemes to align with the region’s modern demographic and epidemiological
needs. Japan's successful deployment of a composite approach,4 implemented
in a stepwise manner while keeping premiums low for socio-economically
disadvantaged individuals, is an example to follow. It is therefore recommended
that ASEAN consider a composite approach to existing UHC scheme options to
ramp up coverage penetration, particularly for the informal sector and primary
4
The composite approach refers to an amalgamation of two UHC models that emerged in the early 20th century:
the Bismarck model, centred on social insurance and employer-based coverage; and the Beveridge model,
funded through taxation. Japan successfully integrated these models into its UHC framework in the latter part of
the 20th century. In contemporary usage, the composite approach has taken on a broader connotation, signifying
the use of diverse best practices culled from developed and developing countries worldwide. These practices may
encompass national health insurance, pooling and redistribution mechanisms, cross-subsidisation, and public–
private partnerships. While a UHC template may provide a useful starting point, it is incumbent upon countries to
identify and to implement best practices that align with their distinct cultural and contextual exigencies.
223
care. Additionally, aiming for administrative efficiencies and preparing for the shift
towards mandatory UHC enrolments should be priorities. Building the collaboration
scheme between the public and private sector is also necessary. To provide long-
term care for as many people as possible, for example, the private sector must be
utilised. Research and development on antimicrobials and to ensure the supply
chain of medical devices and drugs are additional significant topics.
ERIA has commenced projects aiming to establish mutually beneficial relationships

through the formulation of an industry–government–academia–medicine
collaboration mechanism.
6.3.4.2. Develop the Health Care Workforce, and Deploy Technology
ASEAN and Japan should focus on boosting the region’s health care workforce
and embracing a technology strategy to address regional health disparities and
to improve patient outcomes. To achieve this goal, they need to leapfrog the UHC
model through technology by providing base enablers such as internet access and
mobile wallets. Additionally, they should continue digitalisation efforts in various
areas, including cloud; electronic medical records; and low-bandwidth health care
apps for telehealth, decentralised patient education, and social media. Viet Nam's
successful issuance of 97 million digitalised social security numbers through the
VssID mobile app should serve as an example under which UHC design could be
revolutionised.
Data should be collected to provide insights required to construct policies and to

monitor implementation outcomes effectively. Creating consolidated health care
databases, implementing digital transformation best practices, and integrating
diverse health care information such as vaccine records and newborn screenings
are necessary steps to provide better health care outcomes.
6.3.4.3. Tackle Chronic Diseases, and Step up Preventative Efforts against Infectious
Diseases
To effectively address lifestyle and chronic diseases, which inevitably grow

as economies develop, ASEAN and Japan should consider equipping more
institutions with faculty to boost the number of available physicians. They should
also prepare the primary care community for more specialty training, which
is a proven technique in Japan. This means providing educational materials
and incentivising wearable medical technologies for improved data sharing,
particularly for diabetes. For more niche domains like rare diseases and cancers,
they should consider increasing the volume of screening and establishing cross-
border specialist-to-specialist networks.
224
To step up preventative efforts for infectious diseases, which will continue to be
a challenge for ASEAN and Japan, they should increase the availability of and
access to immunisation programmes, which are one of the most cost-effective
public health interventions available. For example, the Ministry of Health, Labour,
and Welfare in Japan collaborates with the Ministry of Education on vaccine
awareness programmes. Additionally, ASEAN should ensure population vaccine
records become digitised to help governments track and manage future outbreak
scenarios.
6.3.4.5.Utilise Public–Private Partnerships to Achieve Universal Health Coverage
Japan's successful implementation of UHC was largely due to the collaboration

between the government and private primary care providers, including small
hospitals, which effectively managed the demand on the health care system.
Therefore, it is essential to leverage the private sector for global best practices,
particularly in areas such as supply chain and logistics, as seen during the
COVID-19 pandemic.
As the middle class develops in ASEAN, models for the privatised provision of
health care services should be leveraged. Moreover, the private sector can serve
as a valuable source of innovation and financial contributions, such as through
taxation, employment, and other joint investment schemes. To further promote
UHC, a new flagship programme should be undertaken, establishing national
preventative care centres, to share lessons beyond AMS and to train the next
generation of leaders.
The potential of private financial resources should also be explored. One approach
is to capitalise on underutilised private insurance, which can serve as financial
security for populations, provided that essential health care is publicly available.
Additionally, social impact bonds can be a viable strategy to promote preventive
health measures, as demonstrated by the Hiroshima Prefecture, where social
impact bonds increased colorectal cancer screening rates, leading to cost
savings in downstream medical expenses and a return on investment for private
investors. Another option to explore is the adoption of public–private financial
schemes from other regions, which can be adapted to the specific UHC context of
the ASEAN region.
To improve health care outcomes by collaborating with the private sector, health
care literacy should be emphasised, preventative health behaviours should be
promoted, and self-care capabilities in AMS should be enabled. Employers can
also lead by example by supporting UHC programmes to achieve scale. For
instance, in Japan, employers are required to provide annual medical check-ups
for their employees, which can serve as a model for other countries to follow.
225
6.3.5. Endorse Sustainable Tourism
6.3.5.1. Promote and Manage Tourism as a Tool for Regional and Local Development
and Revitalisation
Japan can assist ASEAN in achieving sustainable economic growth, especially in

local and rural areas, as well as in safeguarding the environment and cultural
heritage by promoting community-based and people-centred tourism. Japan
has a history of utilising domestic and national tourism to stimulate regional
development and revitalisation, which was aided by the development of its
extensive transport infrastructure. More recent policies aimed at domestic tourism
have sought to leverage the country's abundant natural and cultural resources
to promote sustainable economic growth. Horita and Kato (2018) noted that two
key terms, Kankō and Machizukuri, are used in Japanese tourism. Kankō refers
to the specific role of tourism in regional/local destination development, while
Machizukuri, which is one of the most prominent concepts in the Japanese
approach to tourism, refers to sustainable community development focussed
on social capital; community unity; and resilience based on regional knowledge,
wisdom, and sense of place. By highlighting such ideas, ASEAN can achieve
sustainable economic growth, particularly at the local level and in rural areas,
while also promoting and preserving the environment and its rich cultural heritage.
Japan's experience in this area could be valuable in assisting ASEAN in achieving
these goals.
6.3.5.2. Engage Local Communities
Japan can support ASEAN's pursuit of sustainable tourism development by sharing

its experience of actively engaging local communities in the development and use
of spaces for tourism and leisure. Oura (2018) studied the development of national
forest management and policy in Japan and its relationship to tourism policy,
finding that collaboration in forest management under the concept of 'forests
for people' has brought about wider public participation in management. Further
implementation of such initiatives is necessary to promote the development of
forest tourism in Japan.
Similarly, Horita (2018) noted the engagement of local communities in the

development and use of urban spaces for tourism and leisure in larger
metropolises and small and medium-sized cities in Japan. However, there are still
tensions between development-oriented approaches based on economic growth
and collaborative management approaches based on valuing the locality and
promoting citizen participation in local management. ASEAN is also emphasising
the need for greater citizen engagement and empowerment in pursuing
sustainable tourism development.
226
6.3.5.3. Prepare for Disasters
Japan can share its experiences with ASEAN in promoting tourism development
in the aftermath of disasters. Kato (2018) emphasised the importance of tourism
in the recovery process following the 2011 Tōhoku earthquake and tsunami,
particularly in helping affected communities maintain their connection to their
places. Traditional ecological knowledge-based tourism played a crucial role in
supporting communities and enhancing resilience.
Additionally, Japan's experience in reducing the vulnerability of international

visitors to disasters, such as earthquakes, tsunamis, typhoons, and floods, is
instructive. National and local governments and the tourism industry have utilised
digital technologies, such as mobile safety apps and social media, to disseminate
up-to-date and accurate multilingual information. ASEAN's emphasis on digital
technologies as an enabler for sustainable tourism development makes this
aspect particularly relevant.
6.3.5.4. Measure Sustainable Tourism
Japan has extensive experience in establishing the necessary governance

structures and generating relevant information to support the design of
appropriate tourism policies. This experience can be leveraged to help AMS facing
similar challenges. In Japan, building cooperative arrangements involving various
stakeholders in the tourism sector, including local public bodies, residents, and
the tourism industry, has been crucial to ensuring environmental protection as the
core of sustainable growth in the tourism sector. This approach has been effective
in creating more efficient management and promotion of regional tourism, with
increased numbers of destination management organisations.
To benchmark the state of sustainability nationally, the Japan Tourism Agency

(JTA) conducted a national survey amongst Japan's local governments in 2018,
focussing on key elements such as transport, accommodations, and infrastructure
(JTA, 2019). Following the survey results, JTA established the Sustainable Tourism
Promotion Office and developed a set of internationally recognised sustainable
tourism indicators to serve as a national guideline and to facilitate local
implementation. This resulted in the creation of the Japan Sustainable Tourism
Standard for Destinations (JSTS-D) (JTA, 2019), based on Global Sustainable
Tourism Council (GTSC) standards adapted to the Japanese context, which is now
used to certify industry operators as sustainable to an international standard.
227
The JTA experience in developing and implementing its version of the GSTC
criteria can provide useful insights on how AMS can adapt the criteria to their
contexts. ASEAN recognises that partnerships formed amongst intergovernmental
departments, tourism businesses, civil society, local communities, tourists,
international organisations, and other stakeholders are essential building blocks
for sustainable tourism development. Therefore, the Japanese experience in
establishing appropriate governance structures and monitoring mechanisms to
support sustainable tourism development is ideal for AMS.
6.3.6 Address the Digital Divide amongst Micro, Small, and Medium-Sized
Enterprises
6.3.6.1. Close the Gap
ERIA's ongoing studies have demonstrated that bridging the digital divide amongst
micro and small and medium-sized enterprises (SMEs) requires more than just
improving information and communications technology (ICT) infrastructure and
financial resources. A skilled workforce with both ICT expertise and fundamental
business knowledge is essential to utilise these ICT tools. To address these
challenges in an efficient manner, ASEAN and Japan should collaborate with
private companies, such as Japan's multinational ICT solution providers.
One issue that requires attention is the business knowledge gap that many micro
and SMEs face. This is a fundamental issue that must be addressed if micro and
SMEs are to improve their businesses using digital tools. Enhancing the business
knowledge of micro and SMEs is a difficult task, but ASEAN and Japan can work
together to share knowledge and lessons learned from their respective micro
and SME policy experiences. For instance, Japan's Small and Medium Enterprise
Agency and METI have launched an evidence-based policymaking initiative for
micro and SME policies, which can serve as a useful model for ASEAN.
6.4. Build a Professional Workforce for the Future
6.4.1. Address the Mismatch between Human Resources Skills and Industry Needs
6.4.1.1. Define Human Resources Skills Standards
As a region, ASEAN–Japan must determine what type of human resources will be

required in the future. By defining these skill sets, human resources development
programmes can be developed that align with future industry requirements.
Existing standards established by the International Labour Organisation (ILO)
and the EU should be used as a reference where appropriate. In addition, Japan’s
228
Digital Skill Standard5 focusses on the integration of business and digital skills,
which is an approach that should be adopted in the future, as individuals who can
utilise digital technology for business are in high demand.
The penetration of Industry 4.0 will drastically change the region’s industrial
structure. At the same time, new technologies will develop and spread quickly; the
required skill sets will likely change as well. Therefore, the skill sets to be developed
within the region should be a framework that is continually updated, responding
flexibly to industry demands. Reskilling and upskilling are essential to keep up with
the pace of change and to remain competitive.
6.4.1.2. Incorporate Common Skills into Educational Programmes
ILO and the EU initiatives provide relevant e-learning resources in addition to

defining skill sets on their respective websites. Integrating the skill sets defined
by ASEAN and Japan into educational programmes would ensure consistency
between education and employment, especially since the Chapter 2 survey
revealed skill gaps between human resources and skills required by companies.
These skill sets should not be limited to specific engineers or occupations but
should be applicable to a wide range of business professionals and candidates
such as students in higher education or relevant educational institutions like
technical and vocational education and training (TVET).
To provide education for these skill sets, a wide range of educational institutions
should be involved, including primary and secondary schools, universities,
graduate schools, and TVET institutions. For example, Japan's KOSEN programme,6
which aims to produce highly skilled technical personnel, can be linked to the
skill sets defined by ASEAN and Japan to supply the region’s labour market with
students who possess both advanced technical and business skills applicable to
Industry 4.0. These initiatives can be conducted at specific educational institutions,
and implementation can be widely publicised.
Education is not only for students and the younger generation. A scheme should
also be developed to offer lifelong learning programmes according to a defined
skill set, including post-employment reskilling and upskilling. This programme
should be linked to the human resources exchange programme between ASEAN
and Japan, which requires cooperation with a wide range of stakeholders, including
educational, business, and research institutions.
5
Government of Japan, METI, Digital Skill Standards, https://www.meti.go.jp/policy/it_policy/jinzai/skill_standard/
6
KOSEN is the colleges of technology in Japan that are established by National Institute of Technology and provides
engineering education to students who graduated junior high school or the equivalent. KOSEN has academic
exchange programmes with 11 universities in the Philippines, Singapore, Thailand, and Viet Nam. See National
Institute of Technology, Academic Exchange Agreements, What Is KOSEN, https://www.kosen-k.go.jp/english/what/
educationsystem/academic/
229
6.4.2. Foster Inclusive Education
6.4.2.1. Enhance Inclusive Education through Digital Technologies
The partnership programme between ASEAN and Japan aimed at providing

inclusive education to individuals with limited access to education can be
strengthened by improving network infrastructure and education programmes.
EU assistance in improving the educational environment in neighbouring Eastern
European countries and providing inclusive educational programmes through
public–private partnerships in the Philippines could serve as models for ASEAN
and Japan.
To improve the network infrastructure within ASEAN, advanced technologies such

as 5G networks with high-speed connections could be utilised instead of the
existing network system. 5G infrastructure should thus be widely implemented
within ASEAN.
To provide inclusive education, collaboration between the government or public

agencies and private sectors (e.g. EdTech start-ups) should be considered,
following the example of CrowdSwyft. Many companies provide EdTech services
in ASEAN and Japan, and collaborating with them may help promote digitalised
education in AMS. Partnerships with regional stakeholders can be employed to
teach students how to use tablets and to monitor their learning progress as well.
Moreover, it is essential to prepare educators to utilise digital technology.

Enhancing their digital literacy and educating them about the potential of digital
education are thus necessary.
6.4.3. Ease the Mobility of Human Resources
6.4.3.1. Expand Mutual Recognition Arrangements
ASEAN mutual recognition arrangements presently encompass eight domains,7

which parallel those of Europe . Broadening the range of vocational qualifications
in AMS would bolster the portability of human resources.
While mutual recognition arrangements are currently operating in AMS, their

extension to Japan would amplify the mobility of qualified human resources
7
ASEAN mutual recognition arrangements are the framework to support liberalising and easing trade in services
with the aim of facilitating the mobility of professionals or skilled workers in ASEAN. It covers engineering services,
nursing services, architectural services, surveying qualifications, dental practitioners, medical practitioners, tourism
practitioners, and accountancy services. See ASEAN, ASEAN Mutual Recognition Arrangements, Invest in ASEAN,
https://investasean.asean.org/asean-free-trade-area-agreements/view/757/newsid/868/mutual-recognition-
arrangements.html
230
between ASEAN and Japan. Any effort to establish mutual recognition of
qualifications between ASEAN and Japan must consider the recognition criteria,
with due regard to the prerequisites of Japanese occupational qualifications to
sustain their level of service and competitiveness in the labour market.
6.4.3.2. Mutually Recognise Academic Credits and Degrees
Standardising the educational qualifications and professional standards

recognised by the ASEAN–Japan regional mutual recognition arrangement is
imperative. Ensuring that vocational qualifications meet a minimum standard of
quality would contribute to maintaining high levels of service quality.
The expansion of applicable personnel is desirable to provide a diverse range

of human resources with specialised skills for the labour market. A continued
expansion of schools, applicable faculties, and programmes within the ASEAN
Credit Transfer System is also needed. Additionally, mutual recognition of credits
and study plans for training programmes during training periods should be
implemented, building upon the existing ASEAN Credit Transfer System.8 A common
academic credit transfer framework for Asia for use by universities in ASEAN is
currently being built (SEAMEO RIHED, 2019). To expand the recognition of degrees,
degree exchange programmes should be linked to the qualifications approved by
the mutual recognition arrangements.
8
AUN, ASEAN Credit Transfer System (AUN-ACTS), Thematic Networks, https://aunsec.org/discover-aun/thematic-
networks/aun-acts
231
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ASEAN-Japan

Economic Research Institute for ASEAN and East Asia (ERIA)

© Economic Research Institute for ASEAN and East Asia, 2023

All rights reserved. No part of this publication may be

As we celebrate the momentous 50th year of ASEAN–Japan

Japan's robust foreign direct investment in ASEAN, bolstered

Emerging digital technologies, such as robotics, artificial

Today, ASEAN is experiencing phenomenal economic

Conversely, Japan, despite having one of the most aged

Aligned with these challenges and potential solutions, this

To bring this vision to life, ERIA is poised to launch the Digital

As we commemorate this golden jubilee of friendship and

Professor Tetsuya Watanabe

List of Figures vii

Chapter 1 Review of ASEAN–Japan Economic Relations and Ongoing 1

Doan Thi Thanh Ha and Upalat Korwatanasakul

Chapter 2 Survey on the Doing-Business Environment in ASEAN 23

Keita Oikawa and Fusanori Iwasaki

Chapter 3 ASEAN–Japan Cooperation in the New Emerging Agenda 89

Keita Oikawa ,Venkatachalam Anbumozhi ,Lurong Chen , Christopher L.

Chapter 4 Survey on International Economic Cooperation 143

Keita Oikawa and Fusanori Iwasaki

Chapter 5 The Current ASEAN–Japan Economic Partnership 173

Keita Oikawa and Fusanori Iwasaki

Chapter 6 Recommendations for the ASEAN–Japan Economic Partnership for 211

Keita Oikawa and Fusanori Iwasaki

Doan Thi Thanh Ha

Figure 2.1 Location of Respondents 27

Figure 2.14 Expectations towards Public Initiatives to Solve Difficulties in Employing 41

Figure 2.15 Areas of Interest of Corporate Activities 43

Figure 2.16 Difficulties in Creating Innovative Products and Services 44

Figure 2.17 Difficulties in Creating Innovative Products and Services by Country 45

Figure 2.18 Difficulties in Funding 46

Figure 2.19 Difficulties in Funding by Country 47

Figure 2.20 Expected Public Initiatives to Create Innovation 48

Figure 2.22 Business Operations in Foreign Countries 51

Figure 2.23 Most Significant Difficulties in Doing Business 52

Figure 2.24 Difficulties in Doing Business in the Country Selected Above 53

Figure 3.3 Primary Energy Supply in ASEAN 117

Table 1.8 Provisions on E-Commerce, AJCEP and RCEP 17

Table 2A4.2 Do You Have Difficulties in Creating Innovative Products or Services? 80

Table 2A4.3 Please Let Us Know Why You Think So 81

Table 2A4.5 Please Let Us Know Why You Think So 82

Table 2A5.3 Are You Operating Businesses in Foreign Countries? 86

The formal relationship between the Association of

ASEAN became increasingly positioned as a new production

ASEAN is currently witnessing remarkable economic growth,

In the spirit of cooperative synergy, it is crucial for ASEAN and Japan to

Promote Trade and Investment

Upgrade the ASEAN–Japan Comprehensive Economic Partnership. To promote

Equip companies with relevant information on economic partnership and free

Introduce a fast-track trading scheme under certain conditions. To benefit

Strengthen Supply Chain Resilience

Build a data supply chain ecosystem to strengthen competitiveness of

Expand the scope of digitisation of the intraregional trading system. The

Provide information on alternative sources of parts and materials for supply

Encourage Innovative Smart Cities

Secure Intellectual Property Rights

Ensure Regulatory Reform

Promote financial support for energy-transition technologies. ASEAN and Japan

Improve energy efficiency and connectivity. To achieve ASEAN's energy transition

Introduce emissions trading schemes. ASEAN and Japan should establish an